Wednesday, March 12, 2003

OPEC output to stay current, delegates say

By Bruce Stanley
The Associated Press

VIENNA, Austria - OPEC members have decided to stick with their current crude oil production quotas but are committed to keeping supplies flowing in case of any disruption such as what might result from a war in Iraq, delegates said Tuesday.

Representatives of the Organization of Petroleum Exporting Countries dismissed suggestions that they should formally boost production now as a way of reassuring nervous markets before a U.S.-led attack on Iraq. Despite sharply higher oil prices, OPEC members argued that the world has enough crude to meet demand and blamed the threat of war for causing fears of a possible shortage.

OPEC delegates reached their consensus on production plans during informal talks at a Vienna hotel and met later at the group's headquarters to ratify their decision. OPEC pumps a third of the world's crude.

"There is no disagreement over any of the issues. Shall we put it into two words? Status quo," said Nabeela Abdulla Al-Mulla, Kuwait's senior representative and the emirate's ambassador to Austria.

Algeria's oil minister Chakib Khelil confirmed that there would be no change in OPEC's output target of 24.5 million barrels a day.

He added that delegates have made no specific plan for action in case a conflict in the Persian Gulf blocks Iraqi oil exports.

One OPEC delegate said the group would meet again in June to review output. However, a conflict in Iraq that disrupted supplies could force OPEC to call an emergency meeting before then.

Markets worry that a conflict with Iraq would halt that country's 2 million barrels in daily exports. The impact on supplies and prices of crude could be more severe if fighting spread beyond Iraq's borders.

" Algeria's Khelil said the group could produce an additional 2-4 million barrels a day in an emergency. An expected drop in seasonal demand in the spring should also help ease pressures on supply, he said.

However, many OPEC members are already pumping all they can to profit from prices that are near 12-year highs, and it is unclear how much more oil OPEC could produce even if it wanted to.

The U.S. Energy Administration reported last week that OPEC's spare production capacity, excluding Iraq, was no more than 2 million barrels a day.

That would give the group just enough extra barrels to cover a disruption in Iraqi supplies but no more.

Bill Edwards, an independent energy consultant from Houston, argued that OPEC has "zero" ability to raise output from current levels.

"I think they're producing all they can of the crude that refiners want," he said.

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