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View Full Version : Iraq holds the key to OPEC quotas



Sgt Sostand
09-24-03, 07:19 AM
War-related shortfall helps cartel avoid production cuts
A fireman washes his face for relief from the heat of a raging fire at a crude oil pipeline near Bayji, Iraq last Thursday. Post-war looting has delayed Iraq's attempts to get crude capacity back up to pre-war levels.
Sept. 23 — OPEC members meeting in Vienna this week are once again expected to leave production quotas unchanged as supply and demand for oil seem to be well enough in line to keep prices stable within the cartel’s $22-$28 a barrel target price range. But there are several cross currents at work in world energy markets that could quickly upset the balance

FOR ONE THING, inventories of oil — though they’ve been slowly rebuilding — are at historic lows. In the U.S. the total petroleum stockpile stands at 276 million barrels, enough to supply the nation for two weeks. (That inventory figure does not include the 600-million barrel U.S. Strategic Petroleum Reserve.) That’s 6 percent below normal and the lowest level in a decade for this time of year. Without an adequate supply cushion, oil prices are more sensitive to production interruptions anywhere in the world.
Why are reserves so low? The loss of Iraqi production gets part of the blame, but a strike by Venezuelan workers in December also cut supplies. In fact, petroleum levels have been running well below normal levels for the past year.
But the biggest wild card remains Iraq, which is sitting on the world’s second-largest pool of proven oil reserves. Output from Iraq’s creaky oil industry reached 2.5 million barrels a day in February before production was halted following the fall of Baghdad in March, when production slowed to a dribble.


Since then, Iraqi oil officials and American advisors have been trying to rebuild capacity, which was further damaged by post-war looting. But so far, Iraq is producing only 1.5 million barrels a day — about 900,000 of which is available for export.
“It’s going to take between three months and six months before we see the Iraqi oil output get to a point to the same level as pre-war,” said Fadel Gheit, an oil analyst at Oppenheimer & Co. “And that will give Iraq about 2 million barrels of export. If we have two million barrels of export, you’ll see oil prices in the low 20s.”