Mar 12, 2003 4 min read

By Bruce Stanley AP Business Writer

VIENNA, Austria (AP) – 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.

“We’re not discussing war. We’re discussing stability of the market and that there should be no disruption,” said Al-Mulla.

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.

“The international political tensions have, without any doubt, reduced OPEC’s influence on prices,” OPEC president Abdullah bin Hamad Al-Attiyah acknowledged in a speech to delegates at the start of their formal meeting.

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.

At least one OPEC oil minister – Obaid bin Saif Al-Nasseri of the United Arab Emirates – has acknowledged that it would be difficult for the cartel to cover a bigger supply disruption that included any of Iraq’s neighbors.

Kuwait, where thousands of U.S. troops are poised to attack Iraq, has said a war would prompt it to shut down its northern oil fields to prevent an Iraqi counterstrike. That would reduce Kuwait’s output by around 700,000 barrels a day, or about a third of its production.

Al-Nasseri’s comments on Monday suggested that the United States and other major oil-importing countries might need to rely on their own strategic petroleum reserves. The U.S. alone has a strategic petroleum reserve, or SPR, of 600 million barrels.

“OPEC is working flat out to make sure the market is supplied,” said Raad Alkadiri, an analyst at The Petroleum Finance Co., a Washington consultancy.

Alkadiri agreed that the group would be hard-pressed to cover a dual shortfall from Iraq and Kuwait.

“If there are any signs of supply disruptions beyond Iraq’s borders, then I think we’ll see use of the SPR fairly quickly,” he said.

U.S. Energy Secretary Spencer Abraham, in Vienna for an International Atomic Energy Agency meeting, appeared to confirm that view.

Asked at a news conference whether the U.S. government would release oil from its strategic reserves, Abraham told reporters: “We are prepared to act very quickly, but only if we believe a severe disruption of supply exists.”

The United States and other major importing countries want OPEC to maximize its production if a war threatens supplies.

April contracts of U.S. light, sweet crude were trading at $36.80 a barrel at midday in New York, down 47 cents from Monday’s close. Brent crude futures for April delivery were down 24 cents at $33.48 in London.