- The Washington Times - Tuesday, September 14, 2004

VIENNA, Austria (AP) — The man in charge of Iraq’s massive oil sector promised to better protect infrastructure critical to production and exports as saboteurs underscored the difficulty of that task by blowing up a pipeline junction in the north.

“I’m confident security will be improved,” Iraqi Oil Minister Thamir Abbas Ghadban said yesterday upon arriving at a hotel in Vienna, where the Organization of Petroleum Exporting Countries (OPEC) meets today amid considerable oil-market jitters.

Persistent fighting in Iraq and sporadic disruptions to its petroleum exports have helped propel global oil prices to more than $40 a barrel this summer, as demand remains strong and spare output capacity is relatively thin.

Yesterday, the pipeline sabotage in Iraq compounded supply fears among traders already nervous about the path of Hurricane Ivan in the Gulf of Mexico, where many oil rigs and refineries have been evacuated and production has been shut in, or stopped.

Light sweet crude futures for October delivery rose 68 cents to $44.55 on the New York Mercantile Exchange yesterday, while analysts said Mr. Ghadban’s comments will lend little, if any, comfort to oil markets.

Jan Stuart, head of energy research at FIMAT USA, the New York brokerage unit of Societe Generale, said the perceived tightness in global oil markets was made worse by the attack yesterday near Beiji, where multiple oil pipelines cross the Tigris River 155 miles north of Baghdad.

“Quite simply, a refiner cannot count on getting that crude and needs to bid up prices to secure crude from somewhere else,” Mr. Stuart said. “The risk of interruption is in the price, and that risk is borne out time and again.”

OPEC members, meanwhile, were divided yesterday on whether output and price targets should be increased to reflect market conditions more accurately, and analysts were skeptical of the cartel’s influence these days.

“Both issues are not relevant today because the market is still tight and most OPEC countries are very near capacity,” meaning that they are producing close to their maximum potential, said Leo Drollas, chief economist for the London-based Center for Global Energy Studies.

“There’s nothing they can do or say” that would change the market, he said, describing the meeting as “a bit of a nonevent.”

Even OPEC ministers acknowledged that their ability to bring down prices was limited.

“There is not much that we can do,” Saudi Oil Minister Ali Naimi said, suggesting that speculation by oil traders was the real cause of the high prices today, not OPEC’s failure to accurately predict demand growth this year.

But the disruption of Iraq’s oil production wasn’t expected to influence OPEC’s decision making.

Mr. Naimi said the cartel thinks prices are being driven by fear rather than the fundamentals of supply and demand, adding that OPEC has been pumping more than enough oil to meet the world’s fast-growing energy appetite.

But analysts said the global supply cushion is thin in part because OPEC vastly underestimated oil-demand growth earlier this year, particularly in China and the United States.

Now it seems the group lacks the ability to increase production quickly enough to bring prices down.

OPEC members will consider raising output by 2 million barrels a day, or more than 7 percent, when they meet today.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide