Oil prices dip as markets calmed
Oil prices fell on Tuesday as Opec producers sought to reassure markets they could avert a supply shortage in the event of war in Iraq while the US called for a UN vote this week that could authorize war.
US light crude was down 48 cents at $US36.79 a barrel, below its recent peak of $US39.99. Oil prices set a record high of $US41.15 a barrel during the 1990-91 Gulf crisis.
London benchmark Brent for April fell 39 cents to $US33.30 a barrel.
Prices fell as the Organization of the Petroleum Exporting Countries, which controls around 60% of world crude exports, pledged during a ministerial meeting in Vienna that it was ready to fill any disruption in supply.
Traders took Opec's stance to mean that it would make up for a likely halt to Iraq's oil exports if the United States launches an attack.
"There will be no shortage of oil," said Saudi Oil Minister Ali al-Naimi told reporters. "The test is, when the need is there, whether we will use the capacity or not and I can assure you we will."
Oil prices are up 20% this year on concerns that a war in Iraq could upset oil supplies from the Middle East.
Efforts by Britain and the United States to give Iraq a March 17 ultimatum on scrapping weapons of mass destruction or face attack failed to draw widespread backing, forcing them to put off a vote in the Security Council until later this week.
Both France and Russia have said they would block the March 17 deadline. Other members of the 15-nation Security Council have suggested giving Iraq a further 45 days to comply.
Dashed hopes
Opec dashed hopes among consumer nations for a formal suspension of its output limits if war broke out. Instead, the cartel decided to maintain existing quotas of 24.5 million barrels per day (bpd), said Algerian Oil Minister Chakib Khelil.
"It doesn't really matter what Opec decides officially," said Gary Ross of New York consultancy PIRA Energy. "Saudi Arabia has made its policy clear. They've told customers they won't allow a shortage."
Saudi Arabia has lifted output sharply in recent weeks and analysts say it is now pumping more than 9 million bpd of its 10.5 million bpd capacity.
Delegates said the group's official communique would stress that OPEC already has done a lot to ensure adequate supplies by filling shortages from strike-bound Venezuela.
Severe disruption to Venezuelan supplies since early December 2002 has helped push oil stocks to the lowest level since 1975, and pushed heating oil and natural gas prices during a severe northern winter to record highs.
Forecasts for milder temperatures next week in the US Northeast, the world's largest regional heating oil market, also helped pressure prices on Tuesday.
With most in Opec already pumping to the limit, the cartel would be stretched to cover the loss of Baghdad's 1.7 million barrels daily to the 77 million bpd world market.
Kuwait in addition may close up to 700,000 bpd capacity near its northern border with Iraq, where US troops are poised for war.