www.firstcoastnews.com

VIENNA, Austria (AP) -- A surge in world oil output last month has left producer countries with too little spare capacity to fully offset a wartime halt in supplies from Iraq, the International Energy Agency warned Wednesday. Output increased 2.5 percent worldwide in February and oil inventories tightened in major importing nations, the agency said. Fears of a U.S.-led attack on Iraq propelled prices to their highest levels since the 1991 Persian Gulf War. International oil markets are "running on empty" as war clouds gather again in the Gulf, the agency said in its monthly oil market report. "A further supply disruption would tax a system operating at close to capacity," the report said. The only reliable cushion for consumers may be the 4 billion barrels in strategic stocks of crude that IEA members have amassed for use in an emergency, it added.

The agency issued its grim assessment a day after the Organization of Petroleum Exporting Countries decided to leave its oil production quotas unchanged at 24.5 million barrels a day. OPEC, which pumps about a third of the world's crude, made clear that it would boost its output to try to cover any shortfall arising from a war. The IEA is the energy watchdog of the Organization for Economic Cooperation and Development, a group of the world's wealthiest oil-importing countries. While highlighting many causes for concern in oil markets, the IEA expects that the end of winter - the peak season for heating oil sales - will reduce demand for crude by about 1.6 million barrels a day. Such a decrease would in itself offset a loss of Iraq's current exports under the U.N. oil-for-food program, the report said. The IEA acknowledged efforts by OPEC and independent producers to put additional crude on the market. World production rose in February by 1.96 million barrels a day to 79.41 million barrels, and OPEC contributed more than three-fourths of the increase, the agency said. OPEC member Venezuela boosted its daily production by 850,000 barrels as its oil industry continued to recover from a crippling strike. Saudi Arabia's output grew by 330,000 barrels a day, and of OPEC's 11 members, only Iraq and Indonesia failed to pump at higher levels last month, the report said. "If the IEA's numbers for OPEC production in February are correct, there's a lot of oil on the water that should be hitting inventories in a few weeks. That's the good news for consumers," said Adam Sieminski, an oil price strategist at Deutsche Bank in London. Sieminski agreed that OPEC's limited amount of spare capacity could be a problem if markets suffer a serious supply disruption. Most producers are pumping all they can, and only Saudi Arabia - with the world's biggest oil reserves - has significant room to pump more. OPEC claims to have 2 million to 4 million barrels in additional production capacity. The IEA argued that OPEC's "effective spare capacity" - the additional crude it could produce on short notice - was much smaller. The agency said OPEC's effective spare capacity fell last month to 1.72 million barrels a day from 2.37 million barrels in January, as the cartel produced more oil to make up for the outage from Venezuela. With OPEC increasing production to cash in on current high prices, this extra capacity has probably diminished in March to fewer than 1 million barrels a day, the report said. It warned that OPEC would therefore be unable to quickly cover a war-induced shortfall from Iraq, which produced 2.49 million barrels a day in February. If U.S.-led forces attacked Iraq during the second half of March, the IEA suggested that it would be May before OPEC could offset the shortfall. U.S. spot prices for light, sweet crude climbed by an average of 8.4 percent in February to $35.75 a barrel, while futures prices peaked at $39.99 on Feb. 27. The average spot price of North Sea Brent, the European benchmark crude, rose by 4.3 percent to $32.67, the report said. Projected oil demand for 2003 is 78.01 million barrels a day. A cold winter and greater industrial use of crude in Asia and North America kept demand strong in January, and seasonal demand should fall by 1.6 million barrels a day in the spring, the IEA said. "I think that's a vast underestimate," said Kevin Norrish, head of commodities research at Barclays Capital. He argued that high crude prices are discouraging consumption and slowing economic growth. "The risk has got to be that we'll see a very, very steep fall in demand in the second quarter," Norrish said, echoing OPEC's fears of a possible drop in prices if Iraqi exports resume quickly after a war. On Wednesday, April contracts of U.S. light, sweet crude rose $1.11 to $37.83 a barrel on the New York Mercantile Exchange. On the International Petroleum Exchange in London, April Brent rose 62 cents to $33.91 a barrel.

asia.reuters.com Thu March 13, 2003 11:24 AM ET By Sujata Rao

LONDON (Reuters) - World oil prices came off their recent highs on Thursday as the United States said efforts to garner support for a new U.N. resolution on Iraq could extend into next week, potentially further delaying a Middle East war.

Oil traders said however that despite the downturn, sentiment was bullish because the looming war on oil producer Iraq and shrinking energy stockpiles in the United States, the world's largest crude consumer, continue to raise supply security fears.

London benchmark Brent crude oil fell 35 cents to $33.56 a barrel while U.S. light crude was 33 cents down to $37.50.

"There is a bit of consolidation going on but basically there is still a bias to the upside -- people are concerned about security of supply issues," said Kevin Norrish, energy analyst at Barclays Capital.

"We are not moving into a higher price band just yet because of this uncertainty on the (U.N.) vote," one oil trader said.

Still lacking Security Council support, the White House said on Thursday diplomatic efforts could spill over into next week. Its main ally Britain offered a new concession by offering to drop a demand for President Saddam Hussein to appear on Iraqi television and own up to past illegal weapons programs.

France repeated its opposition to giving Saddam any ultimatums and said it was prepared to kill any such resolution by using its veto.

Members of the U.N Security Council are to meet at 2000 GMT to discuss the new British proposals.

Prices rose on Wednesday as the fall in U.S. stocks combined with worries that oil cartel OPEC would not be able to compensate for lost Iraqi exports in event of war.

Latest U.S. data showed crude inventories falling last week to a 27-year low. There were also sharp drops in gasoline inventories, which ought to be growing as stockbuilding starts for the summer driving season.

Analysts say core oil stocks are now 89 million barrels below normal.

"Given the reported ramping of OPEC production and the continued recovery of Venezuelan production, the shortfall is shocking," SG Securities said in a research note.

The Organization of the Petroleum Exporting Countries has stepped up output this year to cover an outage of crude from Venezuela, where an anti-government strike brought production to little more than a trickle in December and January.

Venezuela, normally the fifth-biggest exporter providing about 13 percent of U.S. oil imports, has increased shipments of crude and oil products though rebel oil workers say production is still less than half of normal levels.

WAR TIMING KEY AS SPRING ADVANCES

Analysts say timing is now key for the war because oil demand is generally two million barrels lower in the second quarter of the year as spring advances and the loss of Iraqi crude will not be as acutely felt as now.

"The more the war gets delayed the less the potential for price spikes," Barclay's Norrish said.

The West's energy watchdog the International Energy Agency says the OPEC cartel likely lacks enough capacity to compensate immediately for the loss of Iraqi and Kuwaiti oil.

It said in its monthly report that the global oil system was "running on empty" and that a further supply disruption would "tax a system running close to capacity."

OPEC however has pledged to guarantee supplies should war break out and Saudi Oil Minister Ali al-Naimi reiterated on Thursday OPEC's ability to deliver oil in case of war in Iraq.

A further note of relief for soaring prices came from an end to freezing U.S. temperatures which have supported heating oil prices at near record levels in recent weeks. Oil traders said a sell-off on heating oil futures was exerting downward pressure on crude.

www.oaklandtribune.com108341241236,00.html Article Last Updated: Thursday, March 13, 2003 - 7:26:01 AM PST By Mark Shenk - Bloomberg News

NEW YORK -- Crude oil futures closed at a 12-year high for the third time in two weeks after an Energy Department report showed an unexpected decline in U.S. inventories.

Supplies last week fell 1.4 percent to 269.8 million barrels, the department said. Inventories were 16 percent lower than a year earlier and close to a 28-year low. Analysts surveyed by Bloomberg expected an increase of about 1.5 million barrels. The decline came as the U.S. prepares to attack Iraq, which pumps about 3 percent of the world's oil.

"This is a big problem," said John Kilduff, senior vice president of energy-risk management at Fimat USA Inc. in New York. "You don't want to have low oil inventories when the country is about to go to war."

Crude oil for April delivery rose $1.11, or 3 percent, to $37.83 a barrel on the New York Mercantile Exchange, the highest closing price since Oct. 16, 1990, when the Iraqi occupation of Kuwait cut off exports from both countries.

Prices reached $39.99 a barrel during trading on Feb. 27, the highest intraday price since October 1990, when futures rose to a record $41.15.

In London, the April Brent crude-oil futures contract rose 62 cents, or 1.9 percent, to $33.91 a barrel on the International Petroleum Exchange.

Crude-oil imports fell 12 percent to 7.62 million barrels a day in the week ended March 7, the weekly report on petroleum inventories, production and imports said.

"This is as bad as it gets," said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York, which markets gasoline and heating oil to local distributors. "Supplies are very tight."

Analysts had expected that rising imports from Venezuela and Saudi Arabia would send inventories higher.

A strike in Venezuela had been limiting shipments to the U.S.

Venezuela pumped about 3 million barrels of oil a day before the strike began in December and now is pumping 2.7 million barrels a day, according to the Venezuelan government.

Striking oil workers say production is closer to 1.9 million barrels a day.

"The decline in imports makes me dubious about Venezuelan output claims," Kilduff said. "Their production can't possibly be what they claim if our imports are down so much. We are their main customer."

www.stuff.co.nz 14 March 2003

SINGAPORE: Oil prices held strong on Thursday, consolidating a US$1 gain after the US government reported a decline in fuel stocks, leaving only a thin supply cushion to cover US needs if war should break out in Iraq.

US light crude rose two cents to $37.85 a barrel, just $3.30 below a record high of $41.15 set during the 1990-91 Gulf crisis.

Latest data from the US Energy Information Administration (EIA) underpinned concerns over a possible supply crunch in the world's biggest oil consumer, as Washington remains poised to launch an invasion of Iraq, the eighth-largest crude exporter.

The EIA reported US crude inventories falling almost four million barrels to 269.8 million, below the government's suggested level for smooth operations and matching a 27-year record low hit in early February.

"Given the reported ramping of Opec production and the continued recovery of Venezuelan production, the shortfall is shocking," SG Securities said in a note.

The Organisation of the Petroleum Exporting Countries has stepped up output this year to cover an outage of crude from Venezuela, where an anti-government strike brought production to little more than a trickle at one point.

Venezuela, normally the fifth-biggest exporter providing about 13 per cent of US oil imports, has increased shipments of crude and oil products as the two-month strike to topple President Hugo Chavez has crumbled.

Rebel oil workers pegged oil exports at 1.14 million barrels per day (bpd) in early March, still well below the 2.7 million bpd it shipped before the strike began in early December.

Crude has risen 20 per cent this year on concerns that a war in Iraq could upset oil supplies from the Middle East.

With about 300,000 US and British troops in the Gulf region, US officials said Iraqi President Saddam Hussein had "days, not weeks" to prove he had complied with UN demands for Baghdad to give up all weapons of mass destruction.

Opec, which controls 60 per cent of world crude exports, pledged earlier this week to ensure adequate supplies should war break out.

But the International Energy Agency, adviser on energy to 26 industrialised nations, said in its monthly oil market report on Wednesday that Opec's spare production capacity had been squeezed to 900,000 bpd following the recent output increases.

"This is less than the potential loss of supply in the event of war in Iraq," said the Paris-based IEA.

Iraqi output, running at 1.7 million bpd over the past month, would be expected to be halted in the event of war. In addition, Kuwait has said it might need to suspend as much as 700,000 bpd as a precaution.

"The market is heading into a period of heightened uncertainty with low stocks and limited spare production and shipping capacity. A further supply disruption would tax a system operating at close to capacity," the IEA said.

biz.yahoo.com Thursday March 13, 3:07 pm ET

NEW YORK (Reuters) - World oil prices plunged more than 4 percent on Thursday as the United States said efforts to garner support for a new U.N. resolution on Iraq could extend into next week, potentially further delaying a Middle East war.

News that the Japanese government plans to sell 300,000 barrels per day from its state reserves should U.S.-led forces begin attacking Iraq, according to a Nihon Keizai Shimbun report, added to the day's slide, traders said.

U.S. light crude was $1.68 down at $36.15 a barrel. London benchmark Brent crude oil fell $1.44 a barrel to $32.47 a barrel.

Oil prices are still up 16 percent this year on concerns that a war in Iraq, which itself ships around 4 percent of world oil exports, could upset oil supplies from other producers in the Middle East.

Prices fell as the White House said on Thursday diplomatic efforts to secure U.N consensus on a new resolution on Iraq could spill over into next week.

Secretary of State Colin Powell told a congressional committee there may be no vote at all on the resolution, a sign that Washington fears it may not get enough support.

A German government source said compromise in the U.N. Security Council on Iraq was unlikely, even if a vote is put off until next week.

Further relief for soaring prices came from an end to freezing U.S. temperatures which have supported heating oil prices at near record levels in recent weeks.

Prices rose on Wednesday as the fall in U.S. stocks combined with worries that oil cartel OPEC (News - Websites)would not be able to compensate for lost Iraqi exports in event of war.

Latest U.S. data showed crude inventories falling last week to a 27-year low. There were also sharp drops in gasoline inventories, which ought to be growing as stockbuilding starts for the summer driving season.

Analysts say core oil stocks are now 89 million barrels below normal. "Given the reported ramping of OPEC production and the continued recovery of Venezuelan production, the shortfall is shocking," SG Securities said in a research note.

OPEC STEPS UP OUTPUT

The Organization of the Petroleum Exporting Countries has stepped up output this year to cover an outage of crude from Venezuela, where an anti-government strike brought production to little more than a trickle in December and January.

Venezuela, normally the fifth-biggest exporter providing about 13 percent of U.S. oil imports, has increased shipments of crude and oil products though rebel oil workers say production is still less than half of normal levels.

Analysts say timing is now key for the war because oil demand is generally two million barrels lower in the second quarter of the year as spring advances and the loss of Iraqi crude will not be as acutely felt as now.

The West's energy watchdog, the International Energy Agency (IEA), says the OPEC cartel likely lacks enough capacity to compensate immediately for the loss of Iraqi and Kuwaiti oil.

OPEC, however, has pledged to guarantee supplies should war break out and Saudi Oil Minister Ali al-Naimi reiterated on Thursday OPEC's ability to deliver oil in case of war in Iraq.

The Nihon Kezai report said Japan will consider releasing oil with the United States, regardless of what the (IEA) advises. Japan and the U.S. are members of the 26-nation IEA, the energy watchdog for industrialized nations that is based in Paris.

The IEA has said that it will allow OPEC to try to cover any shortages in war before it considers, as a last resort, releasing inventories from emergency stockpiles held in consumer nations.

Those reserves, built after the 1974 Arab oil embargo, were last used in the 1990-91 Gulf war after Iraq's invasion of Kuwait.