US to tap oil reserves in crisis

[Rob-TheStormChaser]

The United States will tap its strategic oil reserves should a war in Iraq cause a "severe supply disruption", US Energy Secretary Spencer Abraham has promised.
The oil producers' cartel Opec, meanwhile, reportedly decided to leave oil production quotas at current levels.

Speaking at the sidelines of an informal Opec meeting in Vienna, Algerian Energy Minister Chakib Khelil told the AFP news agency that there would be "no change" in the output quotas set by the cartel.

Opec leaders also attempted to reassure oil anxious markets that a war against Iraq would not disrupt supplies of crude oil.

"There will be no shortage of oil," Ali al-Nuaimi, Saudi Arabia's oil minister, said.

"The test is, when the need is there, whether we will use the capacity or not and I can assure you we will."

Shortages

Opec president Abdullah bin Hamad al-Attiyah added: "If there will be a shortage on the market, then we will come to discuss how to balance and for how long, and see what is the quantity of the shortage."

"So far... we don't feel there is a shortage in the market."

The comments, ahead of the meeting of Opec leaders in Vienna, helped see oil prices fall in Tuesday trade.

In London, the price of Brent crude fell by $0.21 a barrel to $33.48 a barrel.

Oil traders also noted warnings by France and Russia that they would veto any UN resolution authorising war with Iraq, decreasing the likelihood of imminent conflict.

And other observers pointed to seasonal factors, with demand for heating oil now set to be past its northern hemisphere winter peak.

"The market is probably reasonably well supplied at the moment, simply because we are now moving towards the second quarter when demand typically falls for seasonal reasons," Jon Rigby, analyst at Commerzbank in London, said.

The severity of the winter in the US, prompting huge demand for heating oil, was blamed in part for the rise in New York crude prices to nearly $40 a barrel two weeks ago.

'Drummings of war'

Opec last month raised to 24.5 million barrels per day its output ceiling, as the cartel, which targets a $22-28-per-barrel price range, sought to ease supply fears.

But observers had raised doubts that Tuesday's meeting would see further increases in output ordered in an effort to help prices lower.

Many Opec members are already thought to pumping near to full capacity.

And oil ministers are thought to fear a rapid decline in prices should conflict be swift, or avoided altogether.

"There is no reason to lift the quotas," Mr Nuaimi said.

"Eliminate the drummings of war and the price will moderate."

Tor Kartevold, special advisor on oil trading to Norwegian energy giant Statoil, said: "Production from Opec in March will be sufficient to cover demand and fill stocks even if Iraqi oil production disappears.

"After a week or two of war if oil installations are safe prices should decline gradually to around $28 a barrel."