OPEC says it could boost output to prevent wartime oil shortage

newstribune.com Tuesday, March 11, 2003

VIENNA, Austria (AP) -- Despite sharply higher oil prices, OPEC members argued that the world has enough crude to meet demand and blamed the threat of a U.S.-led war against Iraq for fears of a supply disruption.

Even so, representatives of the Organization of Petroleum Exporting Countries tried Monday to reassure nervous markets that its members can provide more oil if a conflict halts Iraq's 2 million barrels in daily exports.

"We want to keep the market reasonably supplied," said Rilwanu Lukman, Nigeria's presidential adviser on petroleum and energy, who added that he believes the market has enough oil for now.

OPEC delegates were to meet Tuesday at the group's Vienna headquarters to review output. Members of the cartel pump about a third of the world's crude, and its members are already exceeding their target to cash in on a 12-year high in prices.

Saudi Arabian Oil Minister Ali Naimi, speaking on arrival at a Vienna hotel, said the market is adequately supplied with crude.

"OPEC will do the most it can to avoid any shock in the market," OPEC President Abdullah bin Hamad Al-Attiyah told reporters at a different hotel. "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."

In the event of war, Al-Attiyah said OPEC would ratchet up production and possibly even suspend its output quotas, to a maximum of 3-4 million more barrels of oil a day.

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 expressed a greater degree of flexibility, without endorsing a suspension.

Yet some analysts worry that OPEC is pumping near its limits and say there is little the cartel can do to cool prices if war breaks out.

A conflict is almost sure to disrupt Iraq's exports, but at least one OPEC member -- the United Arab Emirates -- said it would be difficult for the group to cover a larger shortfall if fighting spreads beyond Iraq's borders.

Kuwait, where thousands of U.S. troops are poised to attack Iraq, has said a war would prompt it to shut down its northern oil fields to prevent an Iraqi counterstrike. That would reduce Kuwait's output by around 700,000 barrels a day, or about a third of its production.

Al-Nasseri's comments suggested that the United States and other major oil-importing countries might need to rely on their own strategic petroleum reserves -- totaling 4 billion barrels.

The United States and other major importing countries want OPEC to maximize its production if a war threatens supplies.

U.S. Energy Secretary Spencer Abraham, due in Vienna on Tuesday to attend an International Atomic Energy Agency meeting, said he might meet with OPEC leaders.

Despite Al-Attiyah's claim that OPEC has 3-4 million barrels in daily spare capacity, it was not clear how much higher the cartel could go in satisfying U.S. demands. Aside from Saudi Arabia and perhaps Nigeria, most OPEC members are believed to be producing at their limits.

April contracts of U.S. crude ended trading Monday at $37.24 a barrel in New York, down 3 cents from Friday's close. Brent crude futures for April delivery closed 41 cents lower at $33.69 in London.