Saudi hits 21-year oil output high before war

Reuters News Service March 28, 2003, 12:16PM

LONDON - Saudi Arabia led a heavy increase in OPEC oil production in March, preventing a spike in crude prices as the United States went to war against Iraq, a leading energy consultancy said today.

The Organization of the Petroleum Exporting Countries was able to more than compensate for cutbacks in exports from Iraq and Nigeria, both cartel member countries, Geneva-based Petrologistics said in a closely watched report.

OPEC's biggest producer Saudi Arabia was responsible for a large chunk of the extra oil, along with Venezuela where the state petroleum company has restored a lot of production after a strike.

Saudi added 600,000 bpd to average 9.56 million bpd and Venezuela increased by the same increment to 2.45 million bpd, recovering from a general strike more quickly than expected.

The increase took Riyadh to its highest crude production in 21 years. Veteran OPEC watcher Geoff Pyne, consultant to Sempra Energy, said it was Saudi's heaviest production since October 1981.

"The Saudis promised to make up for any shortfalls and that's exactly what they've done," said Raad Alkadiri of Petroleum Finance Corp. in Washington.

Total OPEC output, despite lower Iraqi and Nigerian volumes, rose by 430,000 barrels a day in March to 28.36 million bpd, the Petrologistics report said.

Output excluding Iraq, measured for 10 OPEC members with official cartel quotas, rose by 1.55 million bpd to 26.85 million.

The report will fuel worries in OPEC about a possible glut in the second quarter, when world fuel demand subsides seasonally after the winter.

OIL GLUT FEAR

OPEC Secretary-General Alvaro Silva said today the cartel was on alert for a possible price crash.

"Even with the cessation of Iraqi exports and the temporary oil output reduction in Nigeria there is still plenty of oil on the market," Silva said.

"There have been several situations where cargoes have failed to find buyers... All of this points to the need to remain on full alert as to whether the situation of an oil glut could arise."

Gulf neighbours Kuwait and the UAE also pumped more in March with Kuwait increasing by a surprisingly large 360,000 bpd to reach 2.42 million, the report said.

Kuwait was not thought capable of pumping much extra but pushed surge capacity at its large Burgan oilfield in the south of the country. The UAE pumped another 90,000 bpd to supply 2.3 million bpd.

Libya added 50,000 bpd to 1.45 million. Iran fell back a little to 3.8 million bpd but remained well in excess of its official OPEC quota after lifting production in February.

The extra volumes helped drag oil prices lower in mid-March with U.S. crude slumping $9 a barrel, 25 percent, before dealers started worrying about a prolonged war at the end of last week. U.S. crude was valued at $30.70 a barrel today.

Petrologistics estimated Iraq will pump 1.51 million bpd in March, down from 2.63 million in February as exports dried up ahead of the start of war nine days ago.

Nigeria is estimated at 2.00 million bpd, down 145,000 bpd on average for the month after ethnic clashes saw partial closures by Shell and ChevronTexaco from fields in the western Niger delta in the past week.

Shell has been able to compensate for some of the losses by increasing production from east of the Niger.