reuters.com Wed March 5, 2003 12:46 AM ET By Tanya Pang

SINGAPORE (Reuters) - Oil prices held steady on Wednesday with key data on the health of U.S. fuel stockpiles likely to drive direction in the short-term as the United Nations continued to debate possible war in Iraq.

U.S. light crude tip-toed two cents higher to $36.91 a barrel after Tuesday's $1.01 rally in New York.

U.S. crude prices have swung in a wide range of more than $4.50 in the last five trading days after the market touched a 12-year peak at $39.99 on February 27.

The prospect of a war in oil exporter Iraq comes at a time when crude stocks in the United States are hovering at levels not seen since the mid-1970s, increasing anxiety that the world's biggest oil consumer may face a supply crunch.

Apart from lower sales from strike-bound Venezuela, which normally supplies 13 percent of U.S. imports, traders fear war in Iraq may disrupt supplies from other producers in the Middle East, which pumps about 40 percent of globally traded crude oil.

The OPEC producers cartel has sent reassurances to the market that it will cover any shortfall to world supplies should a military attack on Iraq disrupt its crude exports of some two million barrels per day.

But traders and analysts say that most members of the Middle East-dominated group are already pumping at full speed and the Organization of the Petroleum Exporting Countries has little spare capacity to utilize, with the exception of kingpin producer Saudi Arabia.

"It is clear that the loss of Iraqi crude represents a real threat to the stability of the market and that its loss would be difficult to compensate for in the long term. This is where the greatest risk to the market lies," said independent oil analyst Simon Games-Thomas.

Tetsu Emori, chief strategist at Mitsui Bussan Futures in Tokyo, said: "We're looking for crude to move above $40 when the attack is launched on Iraq. Even if OPEC does increase production we still see supplies remaining tight."

The U.S. government Energy Information Administration (EIA) will release later on Wednesday its weekly status report on the health of U.S. fuel stocks, and analysts predicted crude supplies to increase slightly but for winter heating oil stocks to decrease.

In a Reuters poll, six analysts forecast U.S. crude inventories to show a rise of 1.25 million barrels as Saudi Arabia bumped up imports to its ally.

The survey showed stocks of distillates, including heating oil, falling by two million barrels with demand still running high as a severe spell of unusually cold temperatures continued.

Heating oil stocks fell below 100 million barrels last week for the first time in three years, EIA data showed.

Analysts pegged gasoline tanks declining by 500,000 barrels.

MORE TROOPS TO GULF

The United States ordered 60,000 more troops into the Gulf region on Tuesday in its preparations for a military strike on Iraq, which it says is not in full compliance with U.N. demands to disarm weapons of mass destruction.

The United States and Britain has already amassed a 250,000-strong force in the region.

Secretary of State Colin Powel said Washington was gaining support on the U.N. Security Council for a new resolution against Iraq, which at the weekend began to destroy its illegal al-Samoud 2 missiles.

Washington, backed by Britain and Spain, is meeting resistance for a new U.N. resolution permitting military force from Russia, France, China and Germany.

The United States hit a stumbling block in its preparations at the weekend when Turkey's parliament voted against the deployment of U.S. troops on its soil, which would have given access to northern Iraq.

Turkey's government said on Tuesday it was considering a second try at winning parliamentary approval.

www.gulf-daily-news.com Wednesday      5 March 2003

LONDON: Opec oil ministers plan to discuss output flexibility with six rival exporting nations next week as part of contingency planning in the event of a halt in Iraqi supply, an Opec official said yesterday.

Oil prices hit 12-year highs last week near $40 per barrel on fears that any attack on Iraq will disrupt supplies from the Gulf.

Opec, which has recently lifted output to cover for a crippling three-month strike in Venezuela, would struggle to compensate for a total loss of Iraqi exports.

"Just in case Opec cannot compensate for a shortage in the event of war, these countries could do something," an official said.

Opec ministers will meet representatives from Russia, Norway, Mexico, Oman, Syria and Egypt on the morning of next Tuesday, ahead of a formal Opec meeting in Vienna later on the same day.

Many of these countries have participated in recent output restrictions with Opec, when oil prices were half current levels.

The International Energy Agency estimated last month that the world had 2.3 million barrels per day (bpd) of spare oil output capacity versus latest Iraqi output of 2.5m.

Nascent oil exporters Kazakhstan and Angola have not been invited to the talks.

www.gulf-daily-news.com Wednesday      5 March 2003

LONDON: Opec oil ministers plan to discuss output flexibility with six rival exporting nations next week as part of contingency planning in the event of a halt in Iraqi supply, an Opec official said yesterday.

Oil prices hit 12-year highs last week near $40 per barrel on fears that any attack on Iraq will disrupt supplies from the Gulf.

Opec, which has recently lifted output to cover for a crippling three-month strike in Venezuela, would struggle to compensate for a total loss of Iraqi exports.

"Just in case Opec cannot compensate for a shortage in the event of war, these countries could do something," an official said.

Opec ministers will meet representatives from Russia, Norway, Mexico, Oman, Syria and Egypt on the morning of next Tuesday, ahead of a formal Opec meeting in Vienna later on the same day.

Many of these countries have participated in recent output restrictions with Opec, when oil prices were half current levels.

The International Energy Agency estimated last month that the world had 2.3 million barrels per day (bpd) of spare oil output capacity versus latest Iraqi output of 2.5m.

Nascent oil exporters Kazakhstan and Angola have not been invited to the talks.

www.thenassauguardian.com

Not surprisingly, oil prices are climbing, due to instability in Venezuela and the Persian Gulf.

Last week, the price of a barrel of crude reached almost $40, the highest since 1990, when Iraq invaded Kuwait, and about 69 per cent higher than last year.

According to the New York Times, "every time oil prices have risen by at least 60 per cent since World War II, a recession has occurred in the United States, with the exception of a one-month blip in oil prices in 1987."

Higher prices for crude oil have a multiplying effect that flows through the global economy, raising the costs of transportation, production, heating, and other activities. Energy costs are the single most significant indicator of economic trends.

And once again, airlines are being hit hard. The Times reported that American Airlines, a major carrier to The Bahamas, will spend more than $200 million extra on fuel this quarter than in the same period last year. Analysts are predicting that oil costs will soon force American to file for bankruptcy protection.

But how this will affect the Bahamian tourism industry is anyone's guess at the moment, because the politicians responsible for managing our economy are not talking.

Perhaps they are counting on government price controls to resolve the problem.

3/4/03

www.forbes.com Reuters, 03.04.03, 10:10 AM ET

LONDON, March 4 (Reuters) - OPEC oil ministers plan to discuss output flexibility with six rival exporting nations next week as part of contingency planning in the event of a halt in Iraqi supply, an OPEC official said on Tuesday. Oil prices hit 12-year highs last week near $40 per barrel on fears that any U.S.-led attack on Iraq will disrupt supplies from the Gulf, which supplies about 40 percent of world crude exports. The 11-member Organisation of the Petroleum Exporting Countries, which has recently lifted output to cover for a crippling three-month strike in Venezuela, would struggle to compensate for a total loss of Iraqi exports. "Just in case OPEC cannot compensate for a shortage in the event of war, these countries could do something," a cartel official said. OPEC ministers will meet representatives from Russia, Norway, Mexico, Oman, Syria and Egypt on the morning of March 11, ahead of a formal OPEC meeting in Vienna later on the same day. Many of these countries have participated in recent output restrictions with OPEC, when oil prices were half current levels. The West's energy watchdog, the International Energy Agency, estimated last month that the world had 2.3 million barrels per day (bpd) of spare oil output capacity, mostly in Saudi Arabia, versus latest Iraqi output of 2.5 million. Venezuela is pumping about one million bpd, a third of normal levels, three months after an opposition strike began. Adding to the supply woes, Kuwait said it would have to slash output by up to a third during any war in neighbouring Iraq. Most non-OPEC exporters already pump at full capacity, although Mexico said last month it could increase by 100,000 barrels per day in the event of war. Other countries could increase supply for a short period, known as surge production. If OPEC has insufficient spare output capacity, consumer countries represented by the Paris-based IEA have said they will release crude from their huge emergency strategic reserves for the first time since the 1991 Gulf War. Nascent oil exporters Kazakhstan and Angola, which failed to fulfil previous agreements to curb exports when oil prices fell, have not been invited to the OPEC meeting, the OPEC official said.