sg.biz.yahoo.com Wednesday March 12, 8:33 PM (This article was published earlier Wednesday.) By David Bird Of DOW JONES NEWSWIRES

VIENNA (Dow Jones)--"Iraq" and "war" are the words on everyone's lips at the OPEC meeting here, but they aren't found in the group's official communique.

Dancing around the elephant in combat boots in the middle of the room, ministers instead referred to "prevailing geopolitical tensions" in their deal to keep current production policy in place as war approaches.

As with the flowery language employed by the Organization of Petroleum Exporting Countries in its press statement, the group's action itself masks an extremely difficult time for producers, who admit they're powerless to exert much influence over fear-fueled oil prices.

OPEC took the only decision politically acceptable to all its members, officially keeping its 24.5 million b/d output ceiling in place, while pumping as much as they dare amid the current turbulence.

OPEC's President Abdullah bin Hamad al-Attiyah recently acknowledged in his own unique way that ministers don't turn a blind eye to quota violations, but instead watch members' output levels with "one eye open and one eye closed."

In reality, minister have one eye on the rancorous debate at the United Nations Security Council and the other on the massive military buildup in the world's biggest oil patch.

Too Much Or Too Little?

As a quarter-million U.S. troops aim their gun barrels at Iraqi President Saddam Hussein, OPEC can find itself in the blink of an eye supplying far too few or far too many oil barrels to the market.

Ministers shot down a proposal from Saudi Arabia, the only producer with significant spare production capacity, to essentially abandon output restraints amid the war fervor.

Iran led the opposition, on public concerns that OPEC could be seen as giving the green light for a U.S.-led attack on Iraq, by acting in advance to cover exports that could be lost in a war.

But the position of Iran and its allies spoke as much about bad memories of painful efforts to cap runaway production in the past.

"We don't want a one-way ticket to Jakarta," a senior delegate said, referring to the price crash sparked in the Indonesian capital in late 1997 when OPEC misread the market and caused a glut.

OPEC is adding to market anxiety by keeping its capacity figures private, estimating them at a total of 2 million to 4 million b/d. But some independent assessments put them at just 1.5 million b/d, excluding Iraq.

Despite stunted output from Venezuela, still recovering from an oil-workers' strike, OPEC estimates first-quarter output will average 26.4 million b/d, or 1 million b/d over expected demand.

March output - including Iraq - looks to be close to 28 million b/d, compared with demand of less than 23 million b/d. Even if Iraq's 2.4 million b/d is lost and some 700,000 b/d of Kuwaiti supplies are temporarily cut, the flow could be about 2 million b/d over demand.

No Additional Oil From The Saudis?

That's a key reason why Saudi Arabia, while claiming production capacity of 10.5 million b/d, isn't expected to pump beyond current levels of 9.2 million to 9.5 million b/d, even if the war occurs.

Many in OPEC believe that Iraq's oil flows could be interrupted for as little as two weeks in a war, with the U.S. avoiding damage to facilities and the current U.N. oil-for-food plan providing the administrative structure for continued oil sales.

The Saudis won't divulge their production plans, but Saudi officials have told Western officials they don't want to push output to the long-term capacity peak because they don't believe there will be the need to do so, and because a short-term surge followed by shutting-in of wells could lead to future problems.

OPEC delegates say technical experts believe that such action could damage Saudi reservoirs, by causing pressure losses, resulting in lost production capability of two barrels of crude for every barrel produced.

Still, current high OPEC output may be needed to refill global oil stocks, with commercial crude inventories in the U.S. - the world's largest oil market - at their lowest level in a generation.

But many OPEC delegates believe that only a move by consumer countries in the International Energy Agency to open their emergency stockpiles will cool off prices soon.

In what was billed as a coincidental overlap of business meetings, U.S. Energy Secretary Spencer Abraham was in Vienna Tuesday, where he met Saudi Oil Minister Ali Naimi.

Unprecedented Producer-Consumer Talks

Following that meeting, Abraham praised OPEC for covering supply shortages so far by raising output and was thankful for assurances that the Saudis would do more, if needed.

Abraham said the U.S. won't use its 600-million-barrel Strategic Petroleum Reserve to bring down prices, but wouldn't hesitate to use it quickly as a last resort to avoid a shortage.

The unprecedented high-profile talk of top oil representatives from the world's biggest producer and the world's biggest consumer, on the sidelines of an OPEC policy meeting, speaks volumes about the shared concerns over the precarious market situation.

Both Naimi and Abraham believe a sharp drop in oil prices is in both their countries' best interests.

"High prices definitely have a negative impact on demand," Naimi said, while in the U.S. retail gasoline prices are just pennies from a record high and diesel fuel at the pumps have set consecutive all-time high prices in the last several weeks.

OPEC set its next meeting for June 11 in Doha, Qatar

www.voanews.com Melanie Sully Vienna 11 Mar 2003, 20:45 UTC 

OPEC building in ViennaThe Organization of Petroleum Exporting Countries (OPEC) has decided to maintain its current production quotas, saying there will be no oil shortage even if there is a war in Iraq.

OPEC ministers said there is no need to change production quotas, now officially at 24.5 million barrels per day. Members said any shortage in the event of a war against Iraq could be covered.

No official contingency plan was announced, but the cartel said it can produce an extra three million barrels per day if necessary.

OPEC president, Qatar oil minister Abdullah Al-AttiyahOPEC does not want to give the impression it supports a U.S. attack on Iraq, a member country.

Analysts say all OPEC countries are producing nearly to their limit and that supplies from Venezuela are only slowly getting back to normal after a crippling strike. But Saudi Arabia says it could produce more oil if necessary.

The uncertainty surrounding the possible war has pushed oil prices up to their highest levels since the last Gulf War. OPEC fears prices could drop quickly if any war is short-lived.

But the president of International Energy Associates in Washington, Hermann Franssen, says if a war drags on, prices will stay high.

"The market will be impacted by an outage of Iraqi production for three months or longer, and that means that other OPEC producers have to increase production and you will get a situation where the market will remain rather tight for some time to come," he said.

U.S. Energy Secretary Spencer Abraham has said the United States would tap its national reserves as a last resort, in the event of a severe shortage, something OPEC is hoping to avoid.

allafrica.com Vanguard (Lagos) March 11, 2003 Posted to the web March 11, 2003 Emeka Anaeto With Agency Report

AMID speculations that spare production capacities are not substantial enough to stabilise global oil market following the the current gulf crises , The Organisation of Petroleum Exporting Countries (OPEC) is meeting today in Vienna to weigh its options . The meeting is also coming at the backdrop of rising oil prices and slumping oil inventories. The cartel will "see what measures are needed to offset a shortage if there is a military strike in Iraq", an OPEC source said on Friday. Although production quotas are expected to be in the focus, analysts said OPEC will have little room for maneuver at its latest quarterly conference on output policy, given that spare production capacity is relatively small.

"With oil storage levels still sitting well under normal, crude prices well over 30 dollars and the cartel's spare capacity limited almost entirely to just Saudi Arabia, production quotas have effectively been suspended," said a research note by Merrill Lynch Director of Energy Research Michael Rothman. Analyst George Beranek at PFC Energy, a Washington-based consulting group, also noted the divergence between quotas and actual production. "Production is what the market looks for, so at the moment any change in quotas would have little effect," he said. "The question is, do they just agree to disregard the quotas, or formally suspend them?" The price of benchmark Brent crude has soared more than 10 dollars since mid-November, a rise of over 40 percent - as a crippling 63-day strike choked off Venezuela's output and traders speculated on the prospects of rising prices resulting from any war with Iraq.

OPEC raised its collective output quota from 21.7 million barrels per day to 23.0 milloin bpd in January, and again to 24.5 million bpd in February, in a bid to rein in prices. But the quota hikes had little impact, partly because actual output by the group's members already exceeded the quotas, analysts said. OPEC's stated aim is to keep oil prices based on a basket of seven crudes within in a range of 22 to 28 dollars per barrel. But the price of OPEC's basket has stayed well above the cartel's upper target of 28 dollars a barrel since mid-December 2002, while US reference light sweet crude recently hit a 12-year high of almost 40 dollars in New York. With a possible war threatening to cut off Iraq's output of 2-2.5 million bpd, attentions have turned to the ability of other producers to make up any shortfall.

But most member countries are already pumping at or near capacity, leaving only OPEC giant Saudi Arabia in a position to boost production significantly, having already increased output from just over eight million bpd in December to 8.95 million bpd last month, according to industry estimates. Lawrence Eagles, an analyst at brokerage GNI-Man Financial said the latest survey of OPEC production pegged output including Iraq at 27.21 million bpd, up 1.56 million bpd since January. The US Department of Energy estimates that OPEC countries excluding Iraq and Venezuela hold between 2.1 and 2.5 mln bpd of excess oil production capacity that could be brought online.

"This is the second lowest spare capacity level in the past three decades, trailing only the low reached in 1991 after the loss of Iraqi and Kuwaiti production," it said in a study published last Thursday. But analysts said the group is likely to continue ascribing current high oil prices to speculation about war with Iraq, rather than to extremely low global oil inventories. "We suspect that there will be some commentary that current crude prices are largely a function of factors 'beyond OPEC's control', such as speculation about supply security because of a war against Iraq," Merrill Lynch's Rothman said. OPEC secretary general Alvaro Silva Calderon said last Wednesday that the threat of war was pushing up oil prices, but that there was no shortage of supplies of oil to the market. "There is not a lack of oil," Calderon told reporters on the sidelines of an international energy conference in Brussels. "The problem with high prices is the threat of war, and the war is out of our control," he said.

www.bday.co.za

VIENNA - Opec heavyweight Saudi Arabia said the organisation would do its best to stabilise oil markets rattled by threats of war in Iraq, as oil ministers prepared to meet in Vienna.

Saudi Oil Minister Ali al-Nuaimi said global oil markets had adequate supplies and pledged the Organisation of Petroleum Exporting Countries would ensure there remained enough to cover demand.

"There is enough oil on the market and we will make sure there is enough," Nuami told reporters ahead of the meeting. OPEC President Abdullah bin Hamad al-Attiyah of Qatar echoed that analysis.

"For the time being we don't feel there is a shortage in the market," he said.

Al-Attiyah explained that after speaking with clients he understood they also felt enough oil was currently available.

Opec ministers are expected to agree Tuesday on maintaining the cartel's overall output ceiling of 24.5 million barrels per day, rolling over a 6.5-percent increase introduced at the start of February to compensate for disruption to supplies from strike-hit Venezuela.

The Qatari minister said OPEC currently had additional capacity of  "about three million" barrels per day.

But since oil markets were adequately supplied, al-Nuaimi said there was no need to change OPEC's production quota system.

"There is no reason to lift the quotas," he said.

Commerzbank analyst Jon Rigby said Monday in London that sticking with the standing arrangement was the most likely outcome because "there isn't a great deal of new capacity to be introduced."

"The second thing is that the market is probably reasonably well supplied at the moment, simply because we are now moving towards the second quarter when demand typically falls for seasonal reasons," he said, referring to spring in the northern hemisphere.

Despite the Opec assurances, oil prices climbed to a new two-and-a-half-year high in London Monday before falling prey to profit-taking.

The price of a barrel of Brent North Sea crude oil for April delivery fell 26 cents to 33.77 dollars a barrel after spiking to a two-and-a-half year high of 34.55 dollars.

New York's benchmark light sweet crude April-dated futures contract dipped 51 cents to 37.27 dollars a barrel.

Bin Hamad al-Attiyah said that the threat of war in Iraq was adding between six to seven dollars per barrel.

Al-Nuaimi said oil prices would stabilise once the threat of war was lifted.

"Eliminate the drummings of war and the price will moderate," he said.

Opec would do its part to stabilise volatile oil markets to underpin global economic growth, he said.

Al-Nuaimi said OPEC's goal was to "make sure we have a fair price for everybody".

"And that fair price should allow reasonable world economic growth so that demand is not killed," he added.

www.freep.com March 11, 2003

The Organization of Petroleum Exporting Countries will increase its oil production and possibly even suspend its current output quotas to keep the world supplied with ample supplies of crude in the event of a war with Iraq, said Abdullah bin Hamad Al-Attiyah, OPEC president. OPEC members can pump an additional 3 million to 4 million barrels of oil a day, and they are prepared to exhaust this spare production capacity if a war seriously disrupts exports from the Persian Gulf. OPEC's secretary general and oil ministers from Iran, Algeria and Venezuela played down the possibility that the group might suspend its output ceiling.