Oil: Prices rise as traders await Iraq output return

<a href=www.nzherald.co.nz>New Zeland Herald 15.04.2003 8.30 am

NEW YORK - Oil prices rose on Monday (New York time), as the market weighed up the prospect of a return of Iraqi crude exports against possible supply curbs by Opec to avert a potential price crash.

US crude futures for May in New York rose 49 cents to US$28.63 a barrel while benchmark Brent crude oil in London rose 25 cents to US$25.00.

Oil prices have fallen about 30 per cent from pre-war peaks near US$40 as US and British forces quickly secured a majority of Iraq's oil infrastructure in the south of the country and traders predicted a fairly swift end to hostilities.

But any resumption of Iraq's vital crude exports will be up to an interim authority in Baghdad in conjunction with the United Nations

Some analysts forecast that diplomatic wrangling will keep Iraqi barrels off the market for months, but a senior US engineer said on Monday that Iraq's giant Kirkuk oilfields could start pumping within weeks.

The northern fields are capable of producing up to 900,000 barrels per day (bpd) of Iraq's pre-war production of roughly 2.5 million bpd.

"It's a definite possibility that could be just a few weeks away," said Tom Logsdon, a senior member of the US Army Corps of Engineers charged with repairing Iraq's oilfields.

Logsdon said the southern oilfields, where output was up to 2.1 million bpd before the war began on March 20, could be up and running in less than three months.

"Depending how quickly workers come on line, we estimate we will have between 330,000 and 1,000,000 bpd being produced within 12 weeks from now," said Logsdon.

Iraq's crude could hit world markets just as demand wanes in the second quarter, a seasonal slump between winter demand for heating oil and the peak consumption of gasoline during summer.

Compounding the demand downturn, many commercial airlines have slashed routes due to the spread of the flu-like SARS virus around the globe.

At the same time, supplies from Opec producers are running almost two million bpd above the group's self-imposed ceiling, to counter supply disruptions from Venezuela, Nigeria and Iraq.

"The industry is now facing the prospect of too much oil in the months ahead unless Opec reins in some of its recent output increase," the London-based Centre for Global Energy studies said in a report.

The Organisation of the Petroleum Exporting Countries is planning an emergency meeting later this month or in early May to discuss tightening compliance to current output quotas or even possible curbs to formal limits.

The International Energy Agency said last week that a big volume of Opec crude was sitting on the water waiting to hit consumer shores, but warned that it would be imprudent for producers to cut supplies too soon as fuel stockpiles in industrialised nations remain well below normal levels.

Venezuelan President Hugo Chavez said on Friday that South America's biggest oil producer was ready to back any proposed Opec supply cut to support prices in the group's target band of US$22 to US$28 a barrel for Opec's reference basket of seven crudes.

Opec's basket price stood at US$25.40 on Thursday, compared with a monthly average of US$31.54 in February. Reuters