OPEC supply boost helps contain cost of war

<a href=www.canada.com>Reuters Thursday, April 03, 2003

OPEC exporters cut the cost of the Iraqi war to the West by releasing extra volumes of oil last month to prevent a spike in crude prices, according to a Reuters survey of cartel production.

The United States' main allies in the Gulf -- Saudi Arabia and Kuwait -- hiked output dramatically with Riyadh pumping at its highest rate in 21 years, the survey found.

Even U.S. foe Iran lifted supplies, after having publicly opposed any rise in exports on the grounds that it would signal a green light to Washington for an attack.

"The economic incentive to take advantage of high prices while they lasted proved to be stronger than political motives," said Geoff Pyne, consultant to Sempra Energy Trading.

The 11-member Organization of the Petroleum Exporting Countries pumped an extra 440,000 barrels per day (bpd) in March to reach 27.65 million bpd on average, the survey of industry consultants and officials showed.

Excluding Iraq, where exports were cut just ahead of the war, 10 cartel members with quotas pumped an extra 1.77 million barrels a day to 26.45 million bpd. That is 1.95 million bpd above their self-imposed limits of 24.5 million.

The extra barrels were sorely needed by Western importing countries, which had drawn down commercial stockpiles over the winter due to cold weather and shortages from a strike in Venezuela.

Benchmark Brent crude oil prices slumped 17 per cent in March, ending the month at $27.18 per barrel.

Saudi Arabia extended recent output gains to average 9.51 million bpd in March, its highest level since October 1981, but still short of its full capacity of 10.5 million bpd.

"Saudi Arabia had the chance to show that they are a reliable supplier to the United States.

"They did a good job," said George Beranek of Petroleum Finance Co. in Washington