Crude Oil Steady Ahead of Powell's Presentation

www.morningstar.ca 4 Feb 03(6:58 AM) |  E-mail Article to a Friend

LONDON (Reuters) - World oil prices were steady on Tuesday as traders awaited Secretary of State Colin Powell's presentation to the U.N. Security Council on Wednesday that could press the case for war against Iraq.

Powell has said he would provide "sober and compelling proof" that Baghdad was hiding banned weapons from U.N. arms inspectors. The U.S. has vowed to disarm Iraq, by force if necessary. He is due to speak at a Wednesday session beginning at 1530 GMT (1030 EST).

Benchmark Brent crude was up two cents at $30.27 a barrel while New York light crude was four cents lower at $32.72.

Lawrence Eagle, analyst with brokerage firm GNI-Man in London, said the market was unlikely to shift much either way before Powell speaks.

"There's no more news in the market at the moment to move prices," he said.

OPEC WORRIED ABOUT OIL GLUT

With crude output from oil exporter Venezuela creeping higher as the protracted strike there starts to unravel, OPEC officials are starting to fret over a possible oil surplus in the second quarter that may force.

OPEC president Abdullah al Attiyah said on Tuesday a resumption of oil exports from Venezuela may force the cartel to cut second-quarter supplies, but policy was uncertain due to the threat of war in Iraq.

Asked whether increased Venezuelan exports made it more likely that OPEC would have to cut production in the second quarter, Attiyah said: "Yes, why not?"

OPEC ministers will next meet in Vienna on March 11 to discuss policies and output for the next quarter.

Iran's Oil Minister Bijan Zanganeh said OPEC faced two choices at its March meeting, to maintain its official production ceiling or cut output.

"The Iranian minister has summed up OPEC's position, to do something or not," said Eagles.

OPEC ministers had agreed at an emergency session in January to increase its official production limits by 1.5 million barrels per day (bpd) to 24.5 million bpd from February 1 to counter the Venezuelan shortage.

President Hugo Chavez, under pressure from opposition strike leaders to resign, said at the weekend Venezuela was pumping close to 1.8 bpd, up from a low of 150,000 bpd after the strike began in December and more than half of the 3.1 million bpd pumped in November.

Strikers said on Monday that crude output was running at 1.2 million bpd.

Data from shipping agents indicated Venezuela's oil exports rose to 890,000 bpd in the week to February 1 from 550,000 bpd the previous week.

Crude prices are however hovering close to 26-month highs due to the Venezuela strike and fears of a war in Iraq, which traders say would disrupt supplies not only from Iraq but also from other producers in the oil-rich Middle East.