OPEC to raise output in war

www.startribune.com Bruce Stanley, Associated Press Published March 11, 2003 OIL11

VIENNA -- OPEC will increase production and possibly even suspend its output quotas to keep the world supplied with enough crude in the event of war with Iraq, the group's president said Monday.

Members of the Organization of Petroleum Exporting Countries can pump 3 million to 4 million more barrels of oil a day and are prepared to exhaust this spare production capacity if war seriously disrupts Persian Gulf exports, said OPEC head Abdullah bin Hamad Al-Attiyah.

OPEC's secretary general and oil ministers from Iran, Algeria and Venezuela played down the possibility that the group might suspend its output ceiling of 24.5 million barrels a day. Al-Attiyah, OPEC's president, indicated that he favors more flexibility, without actually endorsing a temporary suspension.

"OPEC will do the most it can to avoid any shock in the market," he told reporters ahead of a policy meeting today at OPEC headquarters in Vienna.

OPEC, which pumps about a third of the world's crude, is already exceeding its target as members cash in on prices that have soared to 12-year highs amid fears of a war-induced supply shortage from Iraq.

A conflict would almost certainly disrupt Iraq's daily shipments of 2 million barrels, but at least one OPEC member -- the United Arab Emirates -- expressed doubt about the group's ability to cover a larger shortfall if fighting spreads beyond Iraq.

"OPEC should not be blamed," Al-Attiyah said. "We will do whatever we can, but this is in accordance to our capacity. When we reach a level that we cannot exceed, then we cannot do anything."

Al-Attiyah said the market was well supplied with crude, but the United Arab Emirates' oil minister, Obaid bin Saif Al-Nasseri, warned it would be "very difficult" for OPEC to pump enough oil to cover a simultaneous shortfall in crude exports from Iraq and northern Kuwait.

Kuwait, where most of the U.S. troops that are poised to attack Iraq, has said that in the event of war it would shut down its northern oil fields as a precaution against a possible Iraqi counterstrike. Such a step would reduce Kuwait's output by around 700,000 barrels a day, or about a third of its current production.

Al-Nasseri's comments suggested that the United States and other oil-importing countries would need to rely on their own strategic petroleum reserves as a cushion against a serious disruption in supply.

The United States and other big importers want OPEC to maximize production if a war threatens supplies and causes prices to spike. Energy Secretary Spencer Abraham, due in Vienna today on separate business, said in London that he might meet with leading OPEC oil ministers. Al-Attiyah said Abraham had so far not requested to meet with him.

Some analysts have suggested that large importing countries and OPEC -- two often opposing camps -- might be trying to coordinate an increase in OPEC output with a release of crude from importers' strategic reserves in an effort to head off a war-induced disruption.

Despite Al-Attiyah's claim that OPEC has 3 million to 4 million barrels in daily spare capacity, it was not clear how much higher the cartel could go in satisfying U.S. demands.