VARIOUS: U.S. AND BRITISH TROOPS CAPTURE KEY IRAQI OIL FACILITIES INTACT/OIL PRICES PLUNGE

Record ID: 646591

  • Title: VARIOUS: U.S. AND BRITISH TROOPS CAPTURE KEY IRAQI OIL FACILITIES INTACT/OIL PRICES PLUNGE
  • Date: 20th March 2003
  • Summary: (EU) VIENNA, AUSTRIA (MARCH 20, 2003) (REUTERS) SV/SLV EXTERIOR OF OPEC BUILDING (2 SHOTS) LV OPEC SECRETARY GENERAL ALVARO SILVA SPEAKING AT OPEC MCU (English) ALVARO SILVA, OPEC SECRETARY GENERAL, SAYING: "Member countries have planned to use the spare capacity if it is necessary. That does not mean that we have eliminated the quota system. No, we are in front of an emergency and for this purpose we need to use this spare capacity. We are ready to do that - that is the initial idea."
  • Embargoed: 4th April 2003 13:00
  • Keywords:
  • Location: VIENNA, AUSTRIA / LONDON, UNITED KINGDOM / NEW YORK, USA / UNIDENTIFIED LOCATION, SAUDI ARABIA / VARIOUS UNIDENTIFIED LOCATIONS
  • City:
  • Country: Saudi Arabia Austria Usa United Kingdom
  • Topics: Industry
  • Reuters ID: LVA6209758H36JATPE4TK9YLIRCG
  • Story Text: Oil prices extended a week-long plunge on Friday as U.S. and British troops captured key Iraqi oil facilities intact, calming market fears of widespread destruction by Iraq.
    U.S. and British officers predicted a swift victory after American armoured columns raced deep into Iraq and British marines seized vital oil facilities in the south.
    Oil tumbled to around three-month lows on Friday (March 21) after the initial attack on Thursday (March 20) on hopes of a swift war. Traders said, however, that worries about massive damage to Iraq's oil infrastructure, a spread of the conflict to other Middle East countries and other factors make the price vulnerable.
    OPEC exporters said they could fill any supply gap from the conflict in the oil-rich Gulf, and said markets were already well supplied. The West's energy watchdog, the International Energy Agency, said it saw no reason to release emergency stocks.
    The cartel's Secretary-General Alvaro Silva said on Thursday that the OPEC members have been authorised to use their spare capacity if necessary to make up a shortfall of Iraqi oil. He added the markets were currently "more than well supplied" and the cartel had "sufficient spare capacity to cope with the Iraq situation."
    "We have a spare capacity that in the whole organisation, is considered enough, sufficient in order to attend to the Iraq situation if it continues," he said.
    OPEC exporters, especially U.S. ally Saudi Arabia, have hiked output dramatically over the past few months, first to cover a strike in Venezuela and then to cool a price spike since December fuelled by war fears. OPEC is now pumping 300,000 barrels per day more oil than it was in November, when Venezuela and Iraq were both pumping at full capacity.
    Market analysts believe that the oil market is still reasonably tight, and say another spike in oil price is not unlikely. Bob Parker, Credit Suisse Asset Management Deputy Chairman, believes there are several reasons for that. One, is Venezuelan production is still at recovery stage. In Japan there has been a switch from nuclear power to oil given safety concerns over nuclear, leading to increased oil demand.
    Chinese demand for oil also remains strong. But the key factor in addition to the above is that: "OPEC accepts Saudi Arabia is at near full capacity. Saudi Arabia probably has capacity of surplus of about two million barrels per day. The rest of OPEC is pumping at full capacity. Therefore I think unless oil is released from the strategic reserve in the United States any decline in the oil price is going to be relatively minor compared to where we are at the moment," said Parker.
    "One should always remember that the OPEC target range is $22-$28 per barrel with a central point of $25 per barrel. I think that frankly the oil price will probably settle in the high $20s, i.e. at the higher end of the OPEC range," he added.
    Benchmark Brent crude oil futures fell 66 cents to $24.84 per barrel by afternoon in London, having touched a three-month low of $24.80. U.S. crude also plumbed fresh three-month lows, down 62 cents to $27.50.
    Oil has lost 26-27 percent of its value in a week, having peaked at $35-$40 last month.
    "To be honest with you, we have seen the range, we traded $40 dollars a barrel in 1991, and we went back down to $23 dollars a barrel." said Eric Boiling an independent oil trader.
    "We traded $40 dollars a barrel this last week, a week and half ago and we have some potential to see some lower twenties later on if this conflict gets resolved without any major disruption in oil."
    The Iraqi oilfields fires are a long-term worry for oil markets. But British troops secured a position on the Faw peninsula on the Gulf, which is a strategic oil export route controlling two key major ports.
    Britain said up to 30 oil wells in southern Iraq had been set alight, but Defense Minister Geoff Hoon said fears that hundreds of wells would be torched have not yet been realised.
    A British military spokesman said U.S. forces looked likely to capture the vital Rumaila oilfields largely intact.
    The southern fields, of which Rumaila is the largest with 400 wells, pump about half of the country's 2.5 million barrels of daily production.
    However, fires do not have immediate impact on supply because Iraq's Gulf exports stopped on Monday and this is already factored into prices.
    So far other Gulf producers have reported no disruptions to oil production, nor any disturbances to tanker movements.
    Kuwait, Iran, the United Arab Emirates, Saudi Arabia and Qatar together ship about 15 million bpd of oil through the Gulf.
    GULF WAR 3
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