- The Washington Times - Monday, March 10, 2003

LONDON (AP) OPEC representatives won't have their usual influence on oil prices when they meet tomorrow to review the group's output quotas for crude, analysts say.
Members of the Organization of the Petroleum Exporting Countries already are pumping at or near full production capacity, as worsening fears of a U.S.-led war on Iraq have pushed prices to 12-year highs.
A conflict almost certainly would cut off Iraq's crude exports, currently totaling about 2 million barrels a day. With Venezuela's oil exports still recovering from a strike, OPEC would be hard-pressed to cover a shortfall in Iraqi shipments.
"That's one of the reasons now why the market is so incredibly nervous," said Orrin Middleton, an energy analyst at Barclays Capital. "The real problem is how much can OPEC really do?"
OPEC supplies about a third of the world's oil, but some analysts estimate it has only 1.4 million barrels a day in readily available spare capacity. The United States and other large importing countries are coordinating plans to tap into their strategic petroleum reserves as the ultimate cushion against a major supply disruption, should fighting erupt in Iraq.
OPEC, whose delegates meet tomorrow in Vienna, Austria, can help by suspending its formal production quotas and producing with maximum effort. But at the moment, analysts say, international politics has robbed the cartel of much of its influence.
"For once OPEC is in the back seat, looking out the window. The U.S. is in the front seat, driving the war wagon," said Leo Drollas, chief economist at the Center for Global Energy Studies.
When OPEC oil ministers last met two months ago, they decided to increase the group's production target by 6.5 percent to 24.5 million barrels a day, in the hope of keeping prices at or below $28 a barrel.
Prices have climbed steadily since then. On Feb. 27, futures contracts of U.S. light, sweet crude spiked to a post-Persian Gulf war high of $39.99 a barrel in New York. April contracts of U.S. crude were trading Friday at $37.30 a barrel, while Brent futures for April delivery were at $33.75 in London.
OPEC's members are cashing in on these high prices by pumping well above their official quotas. In February, the group's 10 members, excluding Iraq, produced 24.7 million barrels a day, according to a Dow Jones Newswires survey. Iraq doesn't participate in OPEC's production agreements because the United Nations oversees its exports.
Energy Secretary Spencer Abraham and Claude Mandil, executive director of the International Energy Agency, expressed gratitude Friday for OPEC's willingness to break its own quotas. The agency is the energy watchdog for the Organization for Economic Cooperation and Development, a club of rich oil-importing nations.
"The U.S. government and IEA appreciate the actions of producer nations, which have already increased production to mitigate the effects of the Venezuelan disruption," Mr. Abraham and Mr. Mandil said in a joint statement issued at the agency's headquarters in Paris.
"In light of tight markets, we also appreciate producers' willingness to increase production if necessary to address any further supply disruption."
Mr. Mandil has consulted with officials at OPEC's headquarters in Vienna, in a sign of closer cooperation between importing countries and the cartel. Mr. Abraham planned to visit the city tomorrow on separate business and indicated that he might seek talks with key oil ministers.

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