newstribune.com Tuesday, March 11, 2003

VIENNA, Austria (AP) -- Despite sharply higher oil prices, OPEC members argued that the world has enough crude to meet demand and blamed the threat of a U.S.-led war against Iraq for fears of a supply disruption.

Even so, representatives of the Organization of Petroleum Exporting Countries tried Monday to reassure nervous markets that its members can provide more oil if a conflict halts Iraq's 2 million barrels in daily exports.

"We want to keep the market reasonably supplied," said Rilwanu Lukman, Nigeria's presidential adviser on petroleum and energy, who added that he believes the market has enough oil for now.

OPEC delegates were to meet Tuesday at the group's Vienna headquarters to review output. Members of the cartel pump about a third of the world's crude, and its members are already exceeding their target to cash in on a 12-year high in prices.

Saudi Arabian Oil Minister Ali Naimi, speaking on arrival at a Vienna hotel, said the market is adequately supplied with crude.

"OPEC will do the most it can to avoid any shock in the market," OPEC President Abdullah bin Hamad Al-Attiyah told reporters at a different hotel. "We will do whatever we can, but this is in accordance to our capacity. When we reach a level that we cannot exceed, then we cannot do anything."

In the event of war, Al-Attiyah said OPEC would ratchet up production and possibly even suspend its output quotas, to a maximum of 3-4 million more barrels of oil a day.

OPEC's Secretary General and oil ministers from Iran, Algeria and Venezuela played down the possibility that the group might suspend its output ceiling of 24.5 million barrels a day. Al-Attiyah expressed a greater degree of flexibility, without endorsing a suspension.

Yet some analysts worry that OPEC is pumping near its limits and say there is little the cartel can do to cool prices if war breaks out.

A conflict is almost sure to disrupt Iraq's exports, but at least one OPEC member -- the United Arab Emirates -- said it would be difficult for the group to cover a larger shortfall if fighting spreads beyond Iraq's borders.

Kuwait, where thousands of U.S. troops are poised to attack Iraq, has said a war would prompt it to shut down its northern oil fields to prevent an Iraqi counterstrike. That would reduce Kuwait's output by around 700,000 barrels a day, or about a third of its production.

Al-Nasseri's comments suggested that the United States and other major oil-importing countries might need to rely on their own strategic petroleum reserves -- totaling 4 billion barrels.

The United States and other major importing countries want OPEC to maximize its production if a war threatens supplies.

U.S. Energy Secretary Spencer Abraham, due in Vienna on Tuesday to attend an International Atomic Energy Agency meeting, said he might meet with OPEC leaders.

Despite Al-Attiyah's claim that OPEC has 3-4 million barrels in daily spare capacity, it was not clear how much higher the cartel could go in satisfying U.S. demands. Aside from Saudi Arabia and perhaps Nigeria, most OPEC members are believed to be producing at their limits.

April contracts of U.S. crude ended trading Monday at $37.24 a barrel in New York, down 3 cents from Friday's close. Brent crude futures for April delivery closed 41 cents lower at $33.69 in London.

www.forbes.com Reuters, 03.11.03, 1:56 PM ET (Recasts; updates prices, paragraphs 2-3) NEW YORK (Reuters) - Oil prices fell Tuesday as OPEC producers sought to reassure markets they could avert a supply shortage in the event of war in Iraq while the U.S. called for a U.N. vote this week that could authorize war. U.S. light crude was down 82 cents, or 2 percent, at $36.45 a barrel by 1330 EST (1830 GMT), below its recent peak of $39.99. Oil prices set a record high of $41.15 a barrel during the 1990-91 Gulf crisis. London benchmark Brent for April fell 44 cents to $33.25 a barrel. Prices fell as the Organization of the Petroleum Exporting Countries, which control's around 60 percent of world crude exports, pledged during a ministerial meeting in Vienna that it was ready to fill any disruption in supply. While the group's official communique was expected to avoid any reference to Iraq, traders took OPEC's stance to mean that it would make up for a likely halt to Iraq's oil exports if the United States launches an attack. "There will be no shortage of oil," said Saudi Oil Minister Ali al-Naimi told reporters. "The test is, when the need is there, whether we will use the capacity or not and I can assure you we will." Oil prices are up 20 percent this year on concerns that a war in Iraq could upset oil supplies from the Middle East. Efforts by Britain and the United States to give Iraq a March 17 ultimatum on scrapping weapons of mass destruction or face attack failed to draw widespread backing, forcing them to put off a vote in the Security Council until later this week. Both France and Russia have said they would block the March 17 deadline. Other members of the 15-nation Security Council have suggested giving Iraq a further 45 days to comply.

DASHED HOPES OPEC dashed hopes among consumer nations for a formal suspension of its output limits if war broke out. Instead, the cartel decided to maintain existing quotas of 24.5 million barrels per day (bpd), said Algerian Oil Minister Chakib Khelil. "It doesn't really matter what OPEC decides officially," said Gary Ross of New York consultancy PIRA Energy. "Saudi Arabia has made its policy clear. They've told customers they won't allow a shortage." Saudi Arabia has lifted output sharply in recent weeks and analysts say it is now pumping more than 9 million bpd of its 10.5 million bpd capacity. Delegates said the group's official communique would stress that OPEC already has done a lot to ensure adequate supplies by filling shortages from strike-bound Venezuela. Severe disruption to Venezuelan supplies since early December 2002 has helped push oil stocks to the lowest level since 1975, and pushed heating oil and natural gas prices during a severe northern winter to record highs. Forecasts for milder temperatures next week in the U.S. Northeast, the world's largest regional heating oil market, also helped pressure prices Tuesday. With most in OPEC already pumping to the limit, the cartel would be stretched to cover the loss of Baghdad's 1.7 million barrels daily to the 77 million bpd world market. Kuwait in addition may close up to 700,000 bpd capacity near its northern border with Iraq, where U.S. troops are poised for war.

abcnews.go.com The Associated Press VIENNA, Austria March 11 —

OPEC members agreed Tuesday to stick with their current crude oil production quotas but pledged to boost output in the future to keep supplies flowing in case of any serious disruption.

Representatives of the Organization of Petroleum Exporting Countries ruled out formally raising output now as a way of reassuring nervous markets before any U.S.-led attack on Iraq.

However, they took extreme care not to mention such a conflict as a likely source of disruption, apparently afraid of seeming to support such a war simply by preparing to respond to its possible impact on markets.

Despite sharply higher oil prices, OPEC members argued that the world has enough crude to meet demand and blamed Middle East tensions for causing fears of a possible shortage.

"We are studying the market and keeping abreast of it," Saudi Arabian oil minister Ali Naimi told reporters. "There is no shortage of supply, the market is in balance, there is plenty of oil and there is a commitment to do our best within our capabilities, which we think are enough to satisfy any possible 3/8shortage in the market for whatever reason."

OPEC's president, Abdullah bin Hamad Al-Attiyah, confirmed that it was not changing its output target of 24.5 million barrels a day. Delegates planned to meet on June 11 in Doha, Qatar, to review market conditions, he said.

OPEC officials announced their decision after meeting for two and a half hours at the group's headquarters in Vienna, Austria. OPEC pumps about a third of the world's crude.

Markets worry that a conflict with Iraq would halt that country's 2 million barrels in daily exports. The impact on supplies and prices of crude could be more severe if fighting spread beyond Iraq's borders.

"The international political tensions have, without any doubt, reduced OPEC's influence on prices," Al-Attiyah said in a speech to delegates at the start of their meeting.

He added that OPEC must make a plan to cope with "any radical change in market conditions which may result from developments in the Middle East." This was as close as OPEC's official proclamations went to mentioning a war against Iraq, one of its founding members.

Algeria's oil minister Chakib Khelil said the group could produce an additional 2-4 million barrels a day in an emergency. An expected drop in seasonal demand in the spring should also help ease pressures on supply, he said.

However, many OPEC members are already pumping all they can to profit from prices that are near 12-year highs, and it is unclear how much more oil OPEC could produce even if it wanted to.

The U.S. Energy Administration reported last week that OPEC's spare production capacity, excluding Iraq, was no more than 2 million barrels a day. That would give the group just enough extra barrels to cover a disruption in Iraqi supplies but no more.

Bill Edwards, an independent energy consultant from Houston, argued that OPEC has "zero" ability to raise output from current levels.

"I think they're producing all they can of the crude that refiners want," he said.

At least one OPEC oil minister Obaid bin Saif Al-Nasseri of the United Arab Emirates acknowledged that it would be difficult for the cartel to cover a bigger supply disruption that included any of Iraq's neighbors such as Kuwait, where thousands of U.S. troops are poised to attack Iraq.

Al-Nasseri's comments on Monday suggested that the United States and other major oil-importing countries might need to rely on their own strategic petroleum reserves. The U.S. alone has a strategic petroleum reserve, or SPR, of 600 million barrels.

"OPEC is working flat out to make sure the market is supplied," said Raad Alkadiri, an analyst at The Petroleum Finance Co., a Washington consultancy.

Alkadiri agreed that the group would be hard-pressed to cover a dual shortfall from Iraq and Kuwait.

"If there are any signs of supply disruptions beyond Iraq's borders, then I think we'll see use of the SPR fairly quickly," he said.

U.S. Energy Secretary Spencer Abraham, in Vienna for an International Atomic Energy Agency meeting, appeared to confirm that view.

Asked at a news conference whether the U.S. government would release oil from its strategic reserves, Abraham told reporters: "We are prepared to act very quickly, but only if we believe a severe disruption of supply exists."

The United States and other major importing countries want OPEC to maximize its production if a war threatens supplies. Abraham planned to meet later Tuesday with Saudi Arabia's Ali Naimi.

April contracts of U.S. light, sweet crude were trading at $36.55 a barrel by midafternoon in New York, down 72 cents from Monday's close. Brent crude futures for April delivery were down 34 cents at $33.35 in London.

www.nzherald.co.nz 12.03.2003 8.30 am

NEW YORK - Oil prices fell on Tuesday (NY time) as Opec producers sought to reassure markets they could avert a supply shortage in the event of war in Iraq while the US called for a UN vote this week that could authorize war.

US light crude was down 82 cents, or 2 per cent, at USUS$36.45 a barrel, below its recent peak of USUS$39.99. Oil prices set a record high of USUS$41.15 a barrel during the 1990-91 Gulf crisis.

London benchmark Brent for April fell 44 cents to USUS$33.25 a barrel.

Prices fell as the Organisation of the Petroleum Exporting Countries, which control's around 60 per cent of world crude exports, pledged during a ministerial meeting in Vienna that it was ready to fill any disruption in supply.

While the group's official communique was expected to avoid any reference to Iraq, traders took Opec's stance to mean that it would make up for a likely halt to Iraq's oil exports if the United States launches an attack.

"There will be no shortage of oil," said Saudi Oil Minister Ali al-Naimi told reporters. "The test is, when the need is there, whether we will use the capacity or not and I can assure you we will."

Oil prices are up 20 per cent this year on concerns that a war in Iraq could upset oil supplies from the Middle East.

Efforts by Britain and the United States to give Iraq a March 17 ultimatum on scrapping weapons of mass destruction or face attack failed to draw widespread backing, forcing them to put off a vote in the Security Council until later this week.

Both France and Russia have said they would block the March 17 deadline. Other members of the 15-nation Security Council have suggested giving Iraq a further 45 days to comply.

Opec dashed hopes among consumer nations for a formal suspension of its output limits if war broke out. Instead, the cartel decided to maintain existing quotas of 24.5 million barrels per day (bpd), said Algerian Oil Minister Chakib Khelil.

"It doesn't really matter what Opec decides officially," said Gary Ross of New York consultancy PIRA Energy. "Saudi Arabia has made its policy clear. They've told customers they won't allow a shortage."

Saudi Arabia has lifted output sharply in recent weeks and analysts say it is now pumping more than 9 million bpd of its 10.5 million bpd capacity.

Delegates said the group's official communique would stress that Opec already has done a lot to ensure adequate supplies by filling shortages from strike-bound Venezuela.

Severe disruption to Venezuelan supplies since early December 2002 has helped push oil stocks to the lowest level since 1975, and pushed heating oil and natural gas prices during a severe northern winter to record highs.

Forecasts for milder temperatures next week in the US Northeast, the world's largest regional heating oil market, also helped pressure prices on Tuesday.

With most in Opec already pumping to the limit, the cartel would be stretched to cover the loss of Baghdad's 1.7 million barrels daily to the 77 million bpd world market.

Kuwait in addition may close up to 700,000 bpd capacity near its northern border with Iraq, where US troops are poised for war.

www.fool.com By Jeff Fischer (TMF Jeff) March 11, 2003

At some point, who hasn't dreamed of being an oil sheik? They control much of the world's most sought-after commodity, next to money itself. You could buy an island and blanket it with private jets and swimming pools, just because.

Today, members of the Organization of  Petroleum Exporting Countries (OPEC) suggested that oil output is adequate, and it will not support suspending output quotas. What OPEC didn't admit is that quotas are partly being ignored anyway, as countries "pump up the volume" in order to take advantage of today's crude oil prices before the spring thaw. 

At $37 per barrel, oil is near the $41 record high reached during the 1990-1991 Gulf War. But war drums aren't the only problem. From December to February, oil production in Venezuela tumbled from 3.1 million barrels per day to 1.4 million in politically motivated work stoppages. A war in Iraq might add to the decline in production.

The world consumes 77 million barrels of oil daily, and OPEC supplies 24.5 million, or 32%. Iraq supplies 1.7 million barrels per day. Oil fields in Kuwait producing 700,000 barrels daily would be closed in the event of war, meaning between Iraq and Kuwait, 2.4 million barrels per day would be lost. Whether this shortfall can be replaced by OPEC is hotly debated.

Saudi Arabia said OPEC can make up the shortfall if need be, while OPEC's president said the 11 member countries have capacity to produce an additional 3 million to 4 million barrels per day. However, the U.S. Energy Administration claims OPEC's on-demand spare production capacity is only 2 million barrels daily, and some suggest it's much less than that.

The U.S. Strategic Petroleum Reserve hugging the Gulf of Mexico holds 700 million barrels of crude oil, the largest emergency reserve in the world. In 1990-1991, the reserve was tapped to restrain prices during the Gulf War. Today, as U.S. gasoline prices hit record highs, the Bush administration suggests we're not in a supply emergency yet. The U.S. consumes more than 20 million barrels of crude oil daily.