OPEC May Suspend Quotas if War Halts Iraq

reuters.com Mon February 17, 2003 06:27 AM ET By Tom Ashby

LONDON (Reuters) - OPEC oil exporters will probably agree temporarily to suspend output quotas and pump at will if an attack on Iraq halts exports from the world's eighth largest exporter, an OPEC source said on Monday.

After two OPEC output hikes this year, only Saudi Arabia and perhaps United Arab Emirates have the capacity to make more supply available to world markets immediately.

"One or two countries could volunteer to make up for the loss of supplies should war start on Iraq, but they would need the blessing of other members," the source said, asking not to be named.

"It would be a temporary exemption, just as long as it takes to compensate for the loss and to cool off the market," he added.

The Organization of the Petroleum Exporting Countries, which is due to hold a policy meeting on March 11, is already raising output to cover for an unexpected cut in strike-hit Venezuela, and would be pushed to full capacity if Iraq also stops. Rich nations which rely on OPEC oil for their huge import needs are watching OPEC policy closely, with a view to releasing oil from their massive emergency stockpiles if any severe shortage occurs.

After any war, the source said OPEC would return to the current production ceiling of 24.5 million barrels per day (bpd).

If war has not broken out before OPEC ministers meet, the source said the cartel would probably make no change in the 24.5 million bpd ceiling.

"Until war starts, there is nothing more they can do. More production can't cool prices. They are high because of war hysteria," the source said.

The cartel of mostly Middle Eastern states is committed to covering any supply disruption to the limit of its capacity.

Oil industry analysts estimate that Saudi Arabia and UAE combined have about two million barrels per day (bpd) of spare oil output capacity, roughly equivalent to Iraq's current exports.