OPEC to discuss Iraq oil risks with rivals

www.forbes.com Reuters, 03.04.03, 10:10 AM ET

LONDON, March 4 (Reuters) - OPEC oil ministers plan to discuss output flexibility with six rival exporting nations next week as part of contingency planning in the event of a halt in Iraqi supply, an OPEC official said on Tuesday. Oil prices hit 12-year highs last week near $40 per barrel on fears that any U.S.-led attack on Iraq will disrupt supplies from the Gulf, which supplies about 40 percent of world crude exports. The 11-member Organisation of the Petroleum Exporting Countries, which has recently lifted output to cover for a crippling three-month strike in Venezuela, would struggle to compensate for a total loss of Iraqi exports. "Just in case OPEC cannot compensate for a shortage in the event of war, these countries could do something," a cartel official said. OPEC ministers will meet representatives from Russia, Norway, Mexico, Oman, Syria and Egypt on the morning of March 11, ahead of a formal OPEC meeting in Vienna later on the same day. Many of these countries have participated in recent output restrictions with OPEC, when oil prices were half current levels. The West's energy watchdog, the International Energy Agency, estimated last month that the world had 2.3 million barrels per day (bpd) of spare oil output capacity, mostly in Saudi Arabia, versus latest Iraqi output of 2.5 million. Venezuela is pumping about one million bpd, a third of normal levels, three months after an opposition strike began. Adding to the supply woes, Kuwait said it would have to slash output by up to a third during any war in neighbouring Iraq. Most non-OPEC exporters already pump at full capacity, although Mexico said last month it could increase by 100,000 barrels per day in the event of war. Other countries could increase supply for a short period, known as surge production. If OPEC has insufficient spare output capacity, consumer countries represented by the Paris-based IEA have said they will release crude from their huge emergency strategic reserves for the first time since the 1991 Gulf War. Nascent oil exporters Kazakhstan and Angola, which failed to fulfil previous agreements to curb exports when oil prices fell, have not been invited to the OPEC meeting, the OPEC official said.