UN contradiction sees oil price ease

www.bday.co.za By Daniel Rook

LONDON - Oil prices fell after France and Russia threatened to veto any UN Security Council resolution backing war with Iraq, and ministers of the Opec oil cartel pledged to ensure adequate supplies.

The price of benchmark Brent North Sea crude oil for April delivery lost 21 cents a barrel to $33.48 in early trading.

In New York, the benchmark light sweet crude April-dated futures contract shed 51 cents to $37.27 a barrel on Monday.

Prices eased back after France and Russia gave notice they would veto any UN resolution authorising war with Iraq.

The first signs of discord meanwhile surfaced between the United States and Britain over the question of testing Iraqi compliance with UN resolutions.

Analysts said that the market was beginning to doubt whether war is as imminent as had been believed.

"While a week ago everybody was saying that there was going to be military action on March 18, it now appears that Blair and Bush are failing to get support, particularly from the French and the Russians, and (March) 18 may not be the start of the conflict," said Barclays Capital analyst Orrin Middleton.

Oil ministers from members of the Organisation of Petroleum Exporting Countries (Opec) meeting in Vienna to discuss what action to take in the event of war meanwhile sought to calm nervous markets.

Opec kingpin Saudi Arabia said global oil markets had adequate supplies and pledged the 11-member cartel would ensure demand was met.

"There is enough oil on the market and we will make sure there is enough," Saudi Oil Minister Ali al-Nuaimi told reporters ahead of the Opec meeting.

Opec President Abdullah bin Hamad al-Attiyah of Qatar also said OPEC ministers “don't feel there is a shortage in the market."

The cartel was thus expected to maintain its overall output ceiling of 24.5 million barrels per day, extending a 6.5% increase introduced at the start of February to compensate for disruption to supplies from strike-hit Venezuela.

Dresdner Kleinwort Wasserstein analyst Paul Spedding said that although Opec ministers might discuss a suspension of output quotas behind closed doors, they would probably put the plan on hold and examine it again in the event of war.

He also agreed with their remarks that there is enough supply for the second quarter, when demand usually tails off as spring arrives in the northern hemisphere, though oil companies also use the period to rebuild stocks.

"I think that Saudi Arabia has probably now made up sufficiently to account for the shortfall in Venezuela," he said.

"So I think the market is now getting the amount of Opec crude it needs and for choice I would say that going through March it's probably getting more than it needs," he added.