Supply of oil from Gulf is disrupted

www.abs-cbnnews.com By NEELA BANERJEE The New York Times

As the US military completed its plans to invade Iraq, disruptions of oil supplies and shipments from the Persian Gulf appeared to have already begun Wednesday, industry experts said.

Most notably, exports from Iraq under the United Nations’ oil-for-food program have dwindled to a trickle, a spokesman for the program confirmed, after Secretary-General Kofi Annan of the United Nations suspended the program within Iraq on Monday. More broadly, some oil tankers scheduled to arrive at other Middle Eastern countries are refusing to enter the Persian Gulf because of security concerns, said Nader Sultan, chief executive of the Kuwait Petroleum Corp.

“Companies are saying, ‘Do I send my ships up to the Gulf?”’ Sultan said in a phone interview from Kuwait. “And it’s not just to Kuwait. Then, the question is up to the captain. Beyond insurance, it’s safety, and someone has to make a judgment as to whether it’s safe.”

He added: “It’s already happening, already in the whole of the Gulf, there are tankers not going up. Certain shipping companies and certain countries are rethinking that their ships shouldn’t come here.”

So far, the oil markets have shrugged off concerns that such disruptions could be substantial or last long. At the end of trading on the New York Mercantile Exchange on Wednesday, oil for May delivery dropped, to $29.36 a barrel, while oil for April delivery fell $1.79, to $29.88 a barrel. The price of oil has fallen 21 percent this week on the belief that a war in Iraq will be quick and that there will be little damage to Iraq’s oil fields and facilities.

Iraq shipped some of its biggest loads last week, averaging about 1.8 million barrels a day, according to Walid Khadduri, editor in chief of the Middle East Economic Survey and an expert on the Iraqi oil industry. But shipments began to shrink considerably by the end of the week, Khadduri said.

Now, with the suspension of the oil-for-food program, the loading of oil from the Iraqi port of Mina al-Bakr on the Persian Gulf has stopped, said Ian Steele, a program spokesman. Oil is still flowing from Iraq’s northern Kirkuk field to the Turkish port of Ceyhan, Steele said, where one tanker took on oil Tuesday and another is expected on Friday.

Oil traders and other industry experts said they expected Iraqi exports to end soon even from Ceyhan because the Iraqis would probably shut down most production in preparation for the war. Iraq sends about 35 percent of its oil to the United States, according to PFC Energy, a Washington consulting group, and substantial shipments also go to European oil companies like ENI of Italy and TotalFina Elf of France.

Oil industry representatives said that they would not be badly hurt by the suspension of Iraqi exports because they had already scaled back imports from Iraq over the last year.

A pricing plan for Iraqi oil under the oil-for-food plan proved particularly onerous and discouraged oil sales to many foreigners, oil traders and companies said. Iraq’s own decisions throughout the year to increase or decrease exports will also frustrate buyers.

Over the last two months Iraq’s oil exports have increased as Baghdad compensated for shortfall of oil from Venezuela arising from the general strike there. Still, the growing probability of war over the last few months has sent many companies looking elsewhere for more stable oil supplies.

“People have anticipated the possible cutoff of Iraqi oil for months now,” said Sara Wachter, a spokeswoman for TotalFina Elf, whose own imports have fallen to “pretty minuscule levels” now from 2.5 million barrels a month in November.

Wachter said that oil companies operating in PLDT states were producing more oil along with PLDT members, which are producing far above their quotas to make up for the sharp decline in Venezuelan exports and for a possible halt in Iraqi oil. They are also buying up some of the extra PLDT output, she said.

But oil companies buying oil from other Persian Gulf states now face increasingly more expensive insurance rates, making the journey to that region particularly difficult, industry experts said.

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