Market concern has Iraq stop exports

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Market concern has Iraq stop exports

By Elio Ohep Petroleumworld Caracas, Dec. 1

News Agencies reported that Export-Stopping Deadlock of Iraq oil continues. Iraq's State Oil company informed the United Nations on Friday that stands by its proposed oil prices for December, which were rejected earlier this week as below market value, U.N. officials said.

Iraq has halted all its 2.4 million barrels per day oil exports as a dispute with the United Nations, and raising fears of a posible oil shortage during the winter. Iraq has stopped all loadingof tankers at the Persian Gulf in its Gulf oil export terminal of Mina al-Bakr and halted pumping via its trans-Turkey pipelines Thursday night, according to the U.N. and the Turkish pipeline agency Botas.

The suspension of exports removes about 2.4 million barrels per day-- some 3% of global supply--from the market, at a time of historically low stocks and high prices. the U.N. Agency said.

U.S. Energy Secretary Bill Richardson said the United States was "not terribly concerned" about the Iraqi threat, noting that Gulf oil-exporting states, including Saudi Arabia, would make up the shortfall if Iraq reduced shipments.

But industry analysts have raise doubts that the Saudis can come up that amount of extra oil that fast, they are concerns that the Saudis can only capable of adding 600,000-900,000 barrels per day in the short term.

They said it could take 90 days to start up the full 1.8 million barrels per day. And many crude trading sources said 90 days would be too long to wait to ease market demand. The extra oil would not reach U.S. refineries until May or June, when winter is over. It would reach refiners closer to Iraq only a little sooner, and Venezuela that may pump that extra production capacity, has the constrains that the market is already well-supplied with the heavy crude oil Venezuela produces.

In an attempt to get more control of the income from its oil sales, Iraq's State Oil Marketing Organization (SOMO) is demanding that its customers pay 50 cents per barrel into a non-U.N.-administered account. The U.N. allows Iraq to sell oil to buy food and other essential goods, but the sale proceeds must be channeled through the U.N. Payments to the separate account would violate economic sanctions imposed against Iraq after the Persian Gulf war in 1990 and 1991.

In a midnight telephone call from Baghdad, SOMO officials told the U.N. Oil Overseers that the "feel they are right" about their proposed December prices and that they have no intention at present to change them, officials familiar with the conversation said, reported Dow Jones News Wires

Asian buyers have already been forced to turn to other Gulf exporters to fill their immediate requirements for crude oil.

"We're hoping they will sort it out in the next few days," said a source at one company scheduled to load Iraqi oil in the next few days from Mina al-Bakr, reported Bridge News

http://www.petroleumworld.com/story1577.htm

-- Martin Thompson (mthom1927@aol.com), December 01, 2000

Answers

Iraq dispute threatens oil inventories Supply concerns amid record low stocks, high demand

By Myra P. Saefong, CBS.MarketWatch.com Last Update: 6:27 AM ET Dec 2, 2000 NewsWatch

Updated: 12/1/2000 5:27:50 PM ET NEW YORK (CBS.MW) -- Iraq has been making waves in the oil market recently. But its halt on crude-oil loadings at its ports in Turkey on Friday comes at a time when demand for crude and distillates hit an all- time, October high, according to Falih Aljibury, OPEC consultant for Banc of America Securities.

Aljibury hosted a conference call for the brokerage Friday that emphasized the importance of Iraq's disputes with the United Nations over the last several weeks.

With technical assistance and the proper equipment, Iraq could "easily produce" 4 million barrels per day, he said, noting that the country is a "wild card."

"Iraq is not stable. There are political issues that might cause Iraq to cut its production," Aljibury said.

However, if "you take 3 million barrels out of this tight market, you can well imagine what will happen to the price," he said.

Halt on exports

News that Iraq halted its exports from its ports in Turkey trickled in on Friday, causing concerns that the world may lose out on the oil- rich nation's estimated 2.4 million barrel-per-day of crude exports for an indefinite period of time.

Iraq has been requesting since mid-November that its customers pay a 50-cent-per-barrel premium for its crude oil directly into an account outside of U.N. control.

"You take 3 million barrels out of this tight market, you can well imagine what will happen to the price."

Falih Aljibury Banc of America Securities The U.N. rejected the request on Nov. 27 because the price formula would go against current sanctions against Iraq put into place following its invasion of Kuwait in 1990.

"Make no mistake about it," said Aljibury, the new price formula "is directed towards lifting of the sanctions through easing of the sanctions and throwing the sanctions away."

He noted that Russia and China and others have been loading and paying the 50 cents premium.

Less than a month ago, Iraqi President Saddam Hussein had briefly halted loadings at the Ceyhan port in Turkey awaiting letters of credit conversion to euros from U.S. dollars. Iraq had requested in late October that the United Nations allow it to conduct oil transaction using euros instead of the oil market's benchmark U.S. dollar.

Record low inventories amid record high demand

Despite OPEC's efforts to raise inventory levels, crude supplies remain at record low levels and oil prices remain in the mid-$30- barrel level, Aljibury said.

The cartel has raised its production quota four times this year by more than 3 million barrels per day to virtually no avail.

OPEC has managed its production and it is carefully watching the oil markets to make sure that its production doesn't exceed the demand of the market, Aljibury said, which could cause a supply glut in the market and drive crude prices down.

But total petroleum demand for October averaged about 20 million barrels per day, a record high for any October in the U.S., Aljibury said.

"Economic activities are high; demand for oil and its products are high; prices are high, yet inventories are at an all time low."

Falih Aljibury Oil imports averaged over 9 million barrels per day -- a record high for October and refinery output averaged over 15 million barrels a day, a record for any October, he said. Yet crude-oil stocks totaled "only" 283 million barrels in October -- that's below the same time of last year, he said.

"Fuel-oil demand has been about 4 million barrels per day," he added, "while the stock has been 50 percent below that of last year."

The market can't get much help from non-OPEC nations. "There is no non-OPEC production capacity left," he said. "With such prices and such demand, everybody would want to sell."

"Economic activities are high; demand for oil and its products are high; prices are high, yet inventories are at an all time low," he said.

http://www.iwon.com/bd.redir? redir=http://custom.marketwatch.com/custom/iwon-com/frame.asp? h=http://cbs.marketwatch.com/archive/20001202/news/current/iraqoil.htx ?source=htx/http2_mw&dist=iwn&alias=/ht/nw/tbmarketwatchheadline.html

-- Martin Thompson (mthom1927@aol.com), December 02, 2000.


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