www.smh.com.au February 3 2003

Crude oil prices, which reached a two-year high in London last month, might drop in the second quarter because of excess supply, the president of OPEC said.

"If Venezuela's oil output recovers in the coming weeks, we could see 3 million barrels per day of oversupply in the second quarter," Abdullah bin Hamad al-Attiyah said in Abu Dhabi before an environmental conference.

The Organisation of Petroleum Exporting Countries would be unable to reduce prices now because of "political crisis" in Iraq, said Mr al-Attiyah, who is also the oil minister of Qatar.

Oil prices in New York have held above $US30 a barrel for six weeks, the longest period in two years. A $US5 to $US10 drop would ease pressure on economies in the US and Europe, where growth has slowed and oil demand has stagnated since 1999. The unemployment rate in the US, the world's largest oil consumer, has risen to 6 per cent. In Germany one in 10 workers is jobless.

OPEC agreed last month to increase quotas by 1.5 million barrels to 24.5 million barrels a day starting last Saturday. The move was intended to push prices below $US28 a barrel and allow some members to make up for a shortfall from Venezuela, where a two-month nationwide strike has crippled oil exports.

"Venezuela could reach 2.6 million barrels a day within weeks," Mr al-Attiyah said. "It looks like the strike in Venezuela is coming to an end."

OPEC might be forced to cut quotas when they meet on March 11 in Vienna, he said. "We will have to study the possibility of an oil surplus."

Demand for oil will drop by about 2.5 million barrels a day in the second quarter, compared with the first, Saudi oil minister Ali al-Naimi told reporters at a press briefing in Abu Dhabi. International inventory levels were on the low side, particularly in the US, he said.

Officials from Saudi Arabia, the top producer among OPEC countries, Qatar, Kuwait and the United Arab Emirates have said they can do nothing to lower oil from about a two-year high because the threat of war with Iraq is inflating prices.

"What more can they do," said Salim Shaban, deputy oil minister of Oman, the sixth-largest Middle East oil producer and a non-member nation that has cooperated with OPEC to bolster prices. "You could see oil prices fall by a third if the Iraq issue were solved tomorrow," he said.

Most OPEC states are pumping as much oil as they can to fill a gap caused by a nine-week strike in Venezuela.

economictimes.indiatimes.com REUTERS[ SUNDAY, FEBRUARY 02, 2003 12:27:04 PM ]

ABU DHABI: Opec power Saudi Arabia said on Saturday it saw no shortage of oil in world markets and vowed to ensure the producer group would fulfil its new higher output ceiling of 24.5 million barrels per day (bpd).

"We have responded to the demands of our customers...there is no shortage of crude supply," Saudi Arabia's oil minister Ali al-Naimi told reporters ahead of an energy and environment conference.

"I can assure you that we, as Saudi Arabia, will make sure that 24.5 million bpd is delivered."

Opec agreed last month to hoist its production ceiling by 1.5 million bpd to 24.5 million bpd in a bid to cover a supply shortfall created by strike-bound Opec member Venezuela.

But oil analysts had said the cartel was likely to fall short of the higher production limit since most members say Saudi Arabia and the UAE are bumping up against output capacity.

The Saudi oil minister declined to say how much the kingdom, the world's largest oil exporter, was pumping. Riyadh's new Opec quota from February is set at 7.963 million bpd, but industry sources say flows are expected to reach 8.5-9.0 million bpd.

The influential Saudi oil minister agreed with Opec president Abdullah al-Attiyah that world oil prices for now were being driven by war jitters and not a fundamental shortage of crude.

"The price is not really responding to supply and demand," said Naimi. "The test is that there are no customers asking for supplies. Ask any producer -- all his customers are satisfied."

Attiyah, who is the Qatari oil minister, went a step further and warned of a potential supply glut and price crash during the second quarter.

But for now, the threat of war in West Asia, which supplies 40 percent of world crude exports, and a two-month strike in exporter Venezuela have already pushed oil prices beyond $30 a barrel.

Oil dealers fear that a US-led assault on Iraq, the world's eighth biggest oil exporter, could put a heavy strain on global supplies.

In a bid to soothe market nerves, Naimi insisted that Saudi Arabia would be prepared, if needed, to make use of its still substantial spare capacity which he pegged at 2-2.5 million bpd.

"Saudi Arabia has stated many, many times its responsibility to the oil market," he said. "We will supply any shortage up to our capacity -- whatever the cause."

Naimi has made clear that Riyadh is capable, if necessary, of raising pumping rates to 10 million bpd within weeks.

The Saudi oil minister said Opec stood ready to make up for any supply shortages without major consuming countries having to release their emergency stockpiles of petroleum.

"From the discussions we have had with consuming countries, there is enough confidence now...in the producing countries to make up any shortfall without having to draw on strategic reserves," he said.

"We are willing as producers to make up shortages as they arise."

Worldwide inventories are now running on the low side, particularly in the United States, due to the Venezuelan strike. But Naimi said stockpiles would start to fill up soon.

"With Venezuela returning and supplies steaming to the US, we will see a gradual build in inventories," he said.

Opec president Attiyah said output from Venezuela had already recovered to about 1.4 million bpd and could rise to near full capacity within a few weeks, to near 2.8 million bpd.

The state of global stockpiles will dominate discussions at the cartel's March 11 meeting to review output policy.

"In March, the focus is definitely going to be on where international inventories are and what the projected demand decrease is for the second quarter," said Naimi.

He estimated there would be a demand decline of about 2.5 million bpd in the second quarter of the year when warmer weather in the northern hemisphere cuts consumption for crude.

www.sabcnews.com

February 02, 2003, 08:45

Zlitni said the oil market was well supplied and global inventories were building up, setting the stage for a sharp decline in prices. "Supplies are sufficient and the build up of stocks will have a negative impact on prices, certainly," he said.

The Libyan oil minister said most cartel members were pumping at high rates in a bid to cool-off scorching oil prices which had blasted beyond $30 a barrel. "It seems everybody now is producing above the market requirements to make the market cool," he said.

Opec last month agreed to raise its supply limits by 1,5 million barrels per day (bpd) to 24,5 million bpd to cover the supply gap left by strike-bound member Venezuela.

Ali al-Naimi, an influential Saudi oil minister, said yesterday the kingdom would ensure that the producers group was pumping oil at 24,5 million bpd. - Reuters

www.gulf-daily-news.com Vol XXV   NO. 319      Sunday      2 February 2003

ABU DHABI: Opec president Abdullah Al Attiyah warned yesterday that world oil markets are in danger of tilting into oversupply during the second quarter and triggering a price crash.

For now, the threat of war in the Middle East, which supplies 40 per cent of world crude exports, and a two-month oil strike in Opec producer Venezuela have pushed prices well beyond $30.

Al Attiyah, also oil minister of Qatar, said war fever had driven up crude prices and he saw Venezuelan output coming back and weighing on already well-supplied global markets.

Asked whether he feared a potential price collapse during the second quarter which typically sees a seasonal demand decline of about two million barrels per day (bpd), he told reporters: "Yes, this is one point we should worry about, assuming the scenario as it is today and, for sure, if Venezuela is coming back." Attiyah, in Abu Dhabi for an Energy and Environment conference, predicted a particularly grim outlook from April if exports in strike-bound Venezuela are fully restored.

"If Venezuela comes back (to full capacity), we could have 4m bpd or more floating," he said, adding that the excess could be at least 3m bpd based on current Venezuelan output.

The Opec chief said output from the South American producer stood now at about 1.4m bpd, up from a low of 150,000 bpd in December.

He reckoned flows could climb in a few weeks to near full capacity of 2.8m bpd.

With that scenario in mind, Al Attiyah said the Opec would have to confront the possibility of either a global surplus or shortage when it meets on March 11 to review output policy.

Given Washington's military preparations in the Gulf, the cartel could find itself gathering around the time of a US strike on Iraq, the world's eighth biggest oil exporter.

Al Attiyah repeated that the producers' group was prepared to cover any supply gap which could develop if a US assault on Iraq disrupted exports there of some 2m bpd.

Opec already has lifted supplies by 1.5m bpd from February 1 to cover the shortfall from Venezuela, but the increase has failed to cool off overheated oil markets.

www.gulf-daily-news.com Vol XXV   NO. 319      Sunday      2 February 2003

ABU DHABI: Opec power Saudi Arabia said yesterday there was no shortage of crude oil in the market and it would do its part to ensure the producers' group fulfils its new higher production ceiling of 24.5 million barrels per day (bpd).

"We have responded to the demands of our customers... there is no shortage of crude supply," Saudi Arabia's Oil Minister, Ali Al Naimi, told reporters ahead of an energy and environment conference.

"I can assure we will make sure, as Saudi Arabia, that 24.5m bpd is delivered," he said. Opec agreed last month to raise its output ceiling by 1.5m bpd to 24.5m bpd in a bid to cover a supply shortfall created by strike-bound Opec member Venezuela.

The oil minister of Saudi Arabia, the world's largest oil exporter, declined to say how much the oil the kingdom was pumping, but he said Riyadh now has spare production capacity of 2-2.5m bpd.

Naimi said Opec stood ready to make up for any supply shortages without the release of emergency strategic reserves.

"This is the plan (to cover any shortage without the release of any global strategic stock) and we should have the first crack at it," he said.