Oil falls over Venezuela exports
LONDON: Oil prices fell sharply yesterday as Venezuelan exports recovered from a supply-choking strike and after Opec (Organisation of Petroleum Exporting Countries) ministers warned of a possible glut of crude in the second quarter when winter demand ebbs.
But the threat of a US-led war on oil-producer Iraq kept crude above $30 a barrel. In London, IPE Brent crude was trading 52 cents weaker at $30.58 a barrel, while US light crude dropped 60 cents to $32.91 a barrel.
"The Venezuelan strike is clearly cracking. The question is how quickly they can ramp up production," said J P Morgan's Paul Horsnell.
Venezuelan President Hugo Chavez said on Sunday crude oil output had risen to nearly 1.8 million barrels per day (bpd), up from a low of 150,000 bpd after the strike began in December and more than half of the 3.1m bpd pumped in November.
Oil strikers said yesterday production stood at 1.2m bpd.
Data from shipping agents showed Venezuela's oil exports rose to 890,000 bpd in the week to February 1 from 550,000 bpd a week earlier, but were still only one-third of normal levels of 2.7m bpd before the strike.
Opposition leaders, who want Chavez to resign, scaled back the nine-week action on Sunday in the non-oil sector only.
A return of oil sales from Venezuela, the world's fifth biggest oil exporter, could put pressure on the Opec producers' group to rein in output.
The Opec agreed in January to raise official production limits by 1.5m bpd from February 1 to offset the Venezuelan outage.
But Opec ministers warned at the weekend that oil markets could tip into oversupply in the second quarter and trigger a price collapse.
"If Venezuela comes back (to full capacity), we could have 4m bpd or more floating," said Opec President and Qatari Oil Minister Abdullah Al Attiyah.
Non-Opec supplies also looked robust, with output from Russia, the world's second largest exporter, hitting a post-Soviet high.
Russian Energy Ministry sources said exports via Russia's Transneft pipeline monopoly rose 200,000 bpd in January compared to December and output reached a new high of 8.07m bpd.
But even if supplies have grown, analysts predict oil prices will not fall far until uncertainty is resolved over Iraq, which sells roughly 2m bpd of crude to the world market.
Traders fear supplies might be disrupted, not just from Iraq, but from elsewhere in the Middle East if there is a military strike against Baghdad.
Dealers were also awaiting US Secretary of State Colin Powell address to the United Nations tomorrow when he has pledged to present "straightforward, sober and compelling" proof that Iraq is hiding banned weapons.