www.accessatlanta.com www.nytimes.com By NEELA BANERJEE

Oil and gas tanks at the enormous Saudi installation at Ras Tanura, on the Persian Gulf. A Saudi official says that if Iraqi oil supplies are interrupted, tankers could be expected to divert and pick up additional supplies there.

Saudi Arabia has amassed a reserve of nearly 50 million barrels of oil that it plans to use to compensate for possible disruptions of Iraqi oil exports if war erupts, according to a senior Saudi official and industry experts who have been told about the supply buildup.

"We have about 50 million barrels, most of it in the country," said the Saudi official, who spoke on the condition of anonymity. "We can tap into it immediately once there is a shortfall."

The Saudi stockpile has been built up over the last three months as oil prices have climbed near their highest levels in years. Calls have increased from various political quarters for the Bush administration to release oil from the United States Strategic Petroleum Reserve, which holds 600 million barrels of oil. So far, the administration has said it will let the Organization of the Petroleum Exporting Countries try to make up for any disruptions before tapping the strategic reserve. OPEC is led in effect by Saudi Arabia, the only country with spare production capacity that can be called on in case of supply disruptions.

"We will make sure there is enough oil in the market," the Saudi oil minister, Ali al-Naimi, said in a statement. "We have plenty of spare capacity."

In New York yesterday, the price of crude oil for April delivery settled at $34.93 a barrel, down 45 cents, on profit taking by traders. During the day, oil traded from $34 to $36.95 a barrel.

Industry analysts said Saudi Arabia probably felt compelled to increase production to back up assertions it has long made that it can take care of problems that buffet oil markets.

"It is in the Saudis' interest to produce oil and store some of it away, and the cumulative effect of that is a substantial reserve," said Lawrence J, Goldstein, president of the Petroleum Industry Research Foundation. "The Saudis know that sustained high prices weaken economic activity, decrease demand and encourage non-OPEC production. They want to see a predictable, stable oil supply."

Iraq has been exporting about 1.5 million barrels a day. The cushion the Saudis have built into their system could make up for about a month's disruption of those exports, although Saudi Arabia does not plan to draw down all 50 million barrels, the Saudi official said.

"The United States consumes about one million barrels a day of Iraqi crude," said Yasser Elguindi, a managing director at Medley Global Advisers, a New York consulting firm. "So I don't think it's by accident that the Saudis have these numbers."

A representative of the Saudi oil ministry declined to comment on the reserve. The Saudi official said that he had told members of Congress about the oil pool and that "the U.S. government is certainly aware of this."

"Our oil people have been talking to the National Security Council," he added.

But he said that Saudi Arabia took this step on its own, without arm-twisting by the White House. "You look around and make plans based on different scenarios," he said. "What if there is a war? So you increase capacity. But how do you tap into reserves immediately? You want to make sure that if there are disruptions, the oil markets are covered. The administration didn't say, `Gee, guys, can you do this for us?' "

A White House spokesman declined to comment last night.

Saudi Arabia is producing about 9 million barrels a day, the official said, or about 1.5 million more than its OPEC quota. The Saudis have about 1.5 million barrels of additional production capacity that they can bring on in less than several weeks, if the need arises, he said. Independent experts have estimated that Saudi Arabia is producing 9.2 million to 9.5 million barrels a day, with an additional one million barrels that can be called upon.

The Saudis have stored nearly all their reserve within their borders, the official said, rather than in installations they have in the Caribbean, Europe and the Far East. Saudi Arabia increased production when a general strike in Venezuela reduced exports from there to a trickle. But prices for oil have climbed so high that foreign companies are buying only enough Saudi oil for their immediate refining needs, not to build supplies, Mr. Elguindi said.

Rather than reduce output, the Saudis have continued to increase and store what has not been bought. Oil that would be shipped from Iraq at this point would reach the United States in about 40 days, and any Saudi oil sent to make up for disruptions would take the same amount of time. "Rather than going to Mina al Bakr, more tankers will come to Ras Tanura," the Saudi official said, referring respectively to an Iraqi oil terminal and Saudi Arabia's largest oil port. "But we're not going to paint the barrels yellow and say, `This is part of the 50 million barrels.' "

The Saudi official warned that despite the reserve and the prospect of OPEC and others producing all out, such preparations would not be enough to fully protect world oil markets from volatility.

"You're not going to have any slack whatsoever in the system if there is a setback in Venezuela, or a strike in Nigeria or damage to Kuwaiti oil fields, or if Saddam blows up his fields," he said. "From the point of view of oil, the timing of this war is just horrible."

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www.forbes.com Reuters, 03.17.03, 6:29 PM ET

NEW YORK (Reuters) - NYMEX crude oil futures fell by nearly a dollar in after-hours electronic trade Monday, in the wake of three straight losing sessions, as traders speculated that any U.S.-led war with Iraq would be short.

NYMEX April crude fell 96 cents, or 2.6 percent, to at $33.97 a barrel. In regular trading hours, April fell 45 cents, extending losses in the past three sessions to $2.90, or 7.7 percent.

In a roller-coaster day, the contract moved in a wide $2.35 range, shooting up to $36.35 and then quickly diving to $34.00.

"The market psychology has palpably changed and the urgency to buy has disappeared," said Peter Beutel, president of oil trading consultancy Cameron Hanover in New Canaan, Connecticut.

In London, Brent crude's new prompt month May shed 65 cents, or 2.1 percent, to settle at $29.48 a barrel.

The United States, Britain and Spain ended diplomatic efforts on Monday aimed at winning U.N. approval for an ultimatum to Iraq to disarm or face war. That clears the way for the three countries to launch a war without a vote in the Security Council, analysts said.

U.N. Secretary General Kofi Annan has ordered the pullout of U.N. staff from Iraq and said all U.N. work in the country, including the oil-for-food program, would be suspended.

U.N. arms inspectors were packing their bags and were expected to leave Baghdad early Tuesday.

U.S. President George W. Bush will deliver a television message at 8:00 p.m. EST in which he is expected to make a final ultimatum to Iraqi President Saddam Hussein to leave or face invasion.

U.S. Rep. Bill Tauzin of Louisiana, the Republican chairman of the House Energy and Commerce Committee, said earlier that the 600-million-barrel Strategic Petroleum Reserve had been switched to "flow mode" and were prepared to be put in the market if ordered by Bush.

Iraq exports about 1.7 million barrels per day (bpd) of crude under U.N. supervision as part of sanctions in place following Iraq's invasion of Kuwait in 1990.

Crude has lost about $5, or 13 percent, since NYMEX crude hit a 12-year high of $39.99 on Feb. 27. From mid-November to that high point, NYMEX crude prices had risen more than $15, or 60 percent.

Crude prices also rose as U.S. supplies thinned due to a crippling two-month strike in Venezuela backed by its oil workers that began Dec. 2. Venezuela's production is gradually being restored.

Crude futures jumped to an all time high of $41.15 in October 1990 after Iraq invaded Kuwait in August of that year.

www.forbes.com Reuters, 03.17.03, 3:39 PM ET (Recasts, updates with settlement prices)

NEW YORK (Reuters) - NYMEX crude oil futures pared steep losses but still ended sharply lower Monday for a third session in a row as traders speculated that any U.S.-led war with Iraq would be short.

The likelihood that the United States will act quickly to release oil from its strategic reserves to offset any supply shortage from the Gulf region also helped pull down prices.

In volatile trading, NYMEX April crude fell 45 cents, or 1.3 percent, to settle at $34.93 a barrel, extending losses in the past three sessions to $2.90, or 7.7 percent.

In a roller-coaster day, the contract moved in a wide $2.35 range, shooting up to $36.35 and then quickly diving to $34.00.

"The market psychology has palpably changed and the urgency to buy has disappeared," said Peter Beutel, president of oil trading consultancy Cameron Hanover in New Canaan, Connecticut.

In London, Brent crude's new prompt month May shed 65 cents, or 2.1 percent, to settle at $29.48 a barrel.

The United States, Britain and Spain ended Monday morning diplomatic efforts to win U.N. approval for an ultimatum to Iraq to disarm or face war. That, analysts said, now clears the way for the three countries to launch a war without a vote in the Security Council.

France, which led opposition in the U.N. Security Council to a U.S.-British-Spanish resolution that would authorize war on Iraq after a final chance to disarm, said the move was not justified. Russia, also opposed to the resolution, said any resort to force would be a mistake and a violation of international law.

U.N. Secretary General Kofi Annan has ordered the pullout of U.N. staff from Iraq and said all U.N. work in the country, including the oil-for-food program, would be suspended.

U.N. arms inspectors were packing their bags and were expected to leave Baghdad early Tuesday.

The day's events followed an ultimatum from Bush on Sunday that the U.N. Security Council had just one more day to give its blessing to the proposed Iraq resolution.

The U.S. has vowed to lead a coalition to disarm Saddam, who it accuses of violating U.N. disarmament resolutions, with or without U.N. support. More than 250,000 American and British troops are already poised to attack if the signal is given.

Bush will deliver a television message at 8:00 p.m. EST (0100 GMT Tuesday) in which he is expected to make a final ultimatum to Iraqi President Saddam Hussein to leave or face invasion.

Iraq rejected the U.S. ultimatum on Monday afternoon.

The U.S. has yet to decide whether it would tap its 600-million-barrel Strategic Petroleum Reserve to stabilize domestic supply once Iraqi oil exports stop flowing, the U.S. Department of Energy said.

U.S. Rep. Bill Tauzin of Louisiana, the Republican chairman of the House Energy and Commerce Committee, said earlier that the reserves had been switched to "flow mode" and were prepared to be put in the market if ordered by Bush.

Iraq exports about 1.7 million barrels per day (bpd) of crude under U.N. supervision as part of sanctions in place following Iraq's invasion of Kuwait in 1990. Last January, Iraq sold about 600,000 bpd to the United States.

On Monday, the U.N.-supervised Iraqi oil exports were at a standstill and will likely stay that way until after a U.S.-led assault, which traders now expected imminently.

Iraq's oil exports will be halted indefinitely once U.N. oil export inspectors are evacuated, which is expected to coincide with the pullout of U.N. arms inspectors by Tuesday.

Saddam said early Monday that while Iraq had weapons of mass destruction in the past, it no longer had them.

The day's prices have erased about $5, or 13 percent, since NYMEX crude hit a 12-year high of $39.99 on Feb. 27. From mid-November to that high point, NYMEX crude prices had risen more than $15, or 60 percent, about half of which was seen as a war premium on fears a war would cut off Iraq supplies.

Crude prices also rose as U.S. supplies thinned due to a crippling two-month strike in Venezuela backed by its oil workers that began Dec. 2. Venezuela's production is gradually being restored.

Crude futures jumped to an all time high of $41.15 in October 1990 after Iraq invaded Kuwait in August of that year.

Meanwhile, NYMEX refined product futures tumbled sharply, moving with crude.

April gasoline futures settled 1.33 cents or 1.3 percent lower at $1.0271 a gallon while April heating oil futures settled 2.50 cents or 2.7 percent down at 91.57 cents.

www.heraldsun.news.com.au From correspondents in London 18mar03

OIL prices slumped today as traders took profits after the United States set the stage for a long-awaited war in Iraq that has sent prices skyrocketing in recent weeks.

In a classic "buy the rumour, sell the fact" response, prices fell after the United States, Britain and Spain dramatically withdrew their draft resolution seeking UN support for war on Iraq. US officials said President George W. Bush would give a final ultimatum to Iraqi President Saddam Hussein to leave Baghdad to avert war.

"People feel that war is now definite, and that has reduced the uncertainty over the issue," said GNI trader Paul Goodhew.

In another sign that war was looming, a spokesman for UN disarmament inspectors said the experts were likely to evacuate Iraq on Tuesday at the request of the White House.

The price of Brent North Sea crude oil for May delivery, the new benchmark contract, fell by 83 cents to $US29.30 per barrel in late deals when trading resumed after a period of disruption caused by anti-war protests.

New York's reference light sweet crude contract for April delivery lost 73 cents to $US34.65 per barrel in early trading.

But Commerzbank analyst David Thomas said that prices could bounce back when any bombs start falling on Iraq, until concerns about possible disruption to Iraqi and Kuwaiti oil supplies are assuaged.

Experts say that unlike in the 1991 Gulf war, prices may not fall so dramatically when the bullets start flying because oil stock levels in consumer countries are already very low.

"The possibility of a collapse is going to be much more muted than it was 12 years ago," said Thomas.

"The risk is certainly on the upside for oil prices now. When conflict actually starts, if it looks like being fairly quick then you'll see the price eroding quite rapidly," he said.

Analysts pointed towards higher temperatures arriving in major oil-consuming markets in the northern hemisphere and increased supplies from oil producers as factors likely to fuel a sharp price fall after any war.

"In the background is the realisation that demand is now coming into a much weaker period and supply is very, very high," said Barclays Capital analyst Kevin Norrish.

Crude production from the OPEC oil cartel soared 8.6 per cent or 2.217 million barrels a day in February to 27.88 million bpd, the Middle East Economic Survey (MEES) reported.

With Venezuela resuming output and a significant surge from Gulf states, output by the OPEC 10, without Iraq, climbed 10.1 per cent to 25.45 million bpd last month from 23.113 million bpd in January, the industry newsletter says.

The market is also counting on oil-consuming nations grouped under the umbrella of the International Energy Agency to release oil from their public crude reserves.

IEA executive director Claude Mandil said that the Paris-based grouping would set up a safety net to avert an oil shortage in the event of war against Iraq.

Countries belonging to the IEA held reserves of four billion barrels of oil or the equivalent of 115 days of consumption, which could be used if shortages arose, he said, adding that he did not expect to see such a shortage.

money.cnn.com March 17, 2003: 12:05 PM EST

LONDON (Reuters) - Oil prices slumped Monday despite the imminent threat of war on the world's seventh largest exporter Iraq, as dealers bet on a short conflict.

The possibility of the United States releasing oil from its huge emergency stockpiles also dampened prices, which began the day sharply higher with war fever.

Brent crude oil for May delivery fell 83 cents to $29.30 per barrel on London's International Petroleum Exchange, which was forced to close for two hours when anti-war protesters raided the London market waving banners saying "Oil fuels war." U.S. crude futures fell 68 cents to $34.70 per barrel, some $6 short of their peak during the 1990-1991 Gulf crisis.

"The market believes the war will be short and quick, so there should be a relatively soft landing for crude prices," said Charlie Luke at Aberdeen Asset Management.

Crude oil futures have risen 40 percent in four months as President Bush has stepped up his rhetoric against Baghdad. Bush was scheduled to make an address at 8 p.m. ET (0100 GMT Tuesday) in which he's expected to give Iraqi President Saddam Hussein a limited to leave his country in order to avoid war.

A cold winter and prolonged supply hitch from Venezuela have simultaneously drained commercial stockpiles to historical lows.

But markets have fallen 10 percent in the last week as traders prepared for a quick war that could see Iraq resuming exports within weeks.

"The market is betting on a short, straightforward campaign that would be over fairly quickly," said Steve Turner of Commerzbank in London.

"But there is definitely upside if the war is long and difficult and there are repercussions across the Middle East."

Iraq's U.N.-supervised oil exports, which recently averaged almost two million barrels daily, will slow to a trickle this week as dealers have already stopped buying for fear of an imminent attack.

Iraq's two authorized export terminals in Turkey and the Gulf were both idle Monday morning.

"Apparently, the banks do not believe there is sufficient time for a ship to load at Mina al-Bakr (in the Gulf) and get out before the bombs start dropping," said an industry source.

Iraq and its Gulf neighbors together pump about 40 percent of global crude exports. Forecast stretches to $46

Mike Rothman of Merrill Lynch said oil prices could exceed their Gulf War high of $41, pegging the upper end of his short-term forecast at $46 per barrel for U.S. crude, after reports that Baghdad has placed explosives at oilfields.

"The prospect for crude prices to spike up sharply even from current levels and, more importantly, how long prices stay elevated above the $25 figure we see as oil's 'center of gravity' rests largely on actual events impacting oil flows from the Persian Gulf," Rothman said.

The United States and its allies ended diplomatic efforts to win U.N. approval for an ultimatum to Iraq, clearing the way for them to launch war without Security Council authority.

The State Department has ordered non-essential diplomats and all embassy dependents out of Kuwait, Israel and Syria because of the threat of war, a notice mirroring precautions before the 1991 Gulf War.

Iraq denies possessing weapons of mass destruction and President Saddam Hussein vowed that Iraq would fight back "anywhere in the world" if invaded.

The Organization of the Petroleum Exporting Countries has pledged that it will fill any shortfall in supplies if war disrupts oil flows.