Abraham: OPEC Making Up Oil Losses

<a href=news.moneycentral.msn.com>Reuters March 31, 2003 9:52:00 PM ET

SAN JOSE, Calif. (Reuters) - Increased oil supply from other OPEC producers is making up for output disruption from cartel members Iraq and Nigeria, U.S. Energy Secretary Spencer Abraham said on Monday.

``We've seen a substantial increase in OPEC-10 production, more than enough to compensate for losses in Iraq and Nigeria,'' Abraham told reporters at a government-sponsored technology conference in San Jose, California.

Oil prices have risen 15 percent since the start of last week as ethnic strife cut off 40 percent of Nigeria's production and the United States warned hostilities in Iraq could last longer than some traders had expected.

Iraq's oil exports, which normally make up 4 percent of world oil shipments, have been at a standstill since the early days of the war. U.S. light sweet crude rose nearly 90 cents to close above $31 a barrel on Monday.

Other members of OPEC have ramped up output to cover for the loss of Iraqi exports, with Saudi Arabia hitting its highest production level for 21 years in March, according to industry consultants.

Abraham reiterated comments from the White House earlier on Monday that he had seen no evidence of a severe disruption in oil supply which would require a release of emergency oil reserves.

The Bush administration has been pressured by some members of Congress and consumer groups to tap the nearly 600-million-barrel emergency stockpile.

``We are prepared to use the strategic reserves if we need to do so, if a severe disruption in supply were to take place,'' Abraham said.

A prolonged loss of Nigerian and Iraqi supplies will make it harder to rebuild U.S. inventories already drained by a two-month oil workers' strike in key regional supplier Venezuela and a long, cold winter.

In the meanwhile, Abraham said Venezuela is quickly ramping up production. The government of the South American country, which is the world's fifth-biggest exporter, fired more than 16,000 oil workers and used replacement workers to restart plants after its crippling strike that lasted through January and February.

While bloody clashes between warring factions in Nigeria's oil-rich Niger Delta have disrupted oil output from Africa's biggest producer, Abraham said the United States continues to work with African energy ministries to develop West Africa's energy sector.

``As a region, western Africa remains a very positive potential source of new reserves.''