OPEC Expected to Maintain Production

www.nytimes.com By NEELA BANERJEE

VIENNA, March 10 — Facing the possibility of an imminent war in Iraq and the continued shortfall of oil exports from Venezuela, the Organization of the Petroleum Exporting Countries is expected to announce at its meeting here on Tuesday that it will continue to supply as much oil as the markets need, essentially affirming of what it has been doing for months now, although with limited success.

Most of the 10 voting OPEC members are now pumping as much oil as they can, but prices have stayed stubbornly high. Crude oil for April delivery fell 51 cents a barrel, to $37.27, on the New York Mercantile Exchange today, but oil traded as low as $25 a barrel as recently as last November. Late last month, oil prices flirted with $40 a barrel for the first time since October 1990, after Iraq invaded Kuwait.

Oil industry analysts here said that even if OPEC does nothing on Tuesday, the steps it has taken so far amount to an important political and economic victory for the group. They noted that prices would have been even higher had OPEC not ramped up production to compensate for the loss of Venezuelan oil output and then to calm a market jittery about a possible halt in Iraqi exports in the case of war.

Recently, oil-consuming countries, led by the United States and Europe, gave OPEC a vote of confidence by announcing that they would allow the organization make up for any possible shortfall in oil supplies if war broke out, before they themselves released oil from their strategic stockpiles.

At a time when many in the United States are calling for greater imports of oil from outside the Middle East, OPEC's pre-emptive action has shown that in fact the Persian Gulf states, particularly Saudi Arabia, are the only ones with the spare production capacity that can be called upon in a pinch to dampen prices, analysts said.

"This is Saudi Arabia's crowning glory in its short-term relations with the United States," said Raad Alkadiri, a director at PFC Energy, a Washington consulting group.

"They have shown that they have the willingness to keep spare capacity that becomes of enormous strategic importance to Western markets," he said. "Despite the stresses and strains in their relations with the United States, they have shown that they are willing to act to keep prices under control."