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Archive for Thursday, March 13, 2003

Agency warns oil markets ‘running on empty’

Energy watchdog says surge in output creates little room to cope with shortfall in Iraqi exports

March 13, 2003

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— A surge in world oil output last month has left producer countries with too little spare capacity to fully offset a wartime halt in supplies from Iraq, the International Energy Agency warned Wednesday.

Output increased 2.5 percent worldwide in February and oil inventories tightened in major importing nations, the agency said. Fears of a U.S.-led attack on Iraq propelled prices to their highest levels since the 1991 Gulf War.

International oil markets are "running on empty" as war clouds gather again in the Persian Gulf, the agency said in its monthly oil market report.

"A further supply disruption would tax a system operating at close to capacity," the report said.

The only reliable cushion for consumers may be the 4 billion barrels in strategic stocks of crude that IEA members have amassed for use in an emergency, it added.

Tuesday, the Organization of Petroleum Exporting Countries decided to leave its oil production quotas unchanged at 24.5 million barrels a day. OPEC, which pumps about a third of the world's crude, made clear that it would boost its output to try to cover any shortfall arising from a war.

The IEA is the energy watchdog of the Organization for Economic Cooperation and Development, a group of the world's wealthiest oil-importing countries.

While highlighting many causes for concern in oil markets, the IEA expects that the end of winter -- the peak season for heating oil sales -- will reduce demand for crude by about 1.6 million barrels a day. Such a decrease would in itself offset a loss of Iraq's current exports under the U.N. oil-for-food program, the report said.

The IEA acknowledged efforts by OPEC and independent producers to put additional crude on the market. World production rose in February by 1.96 million barrels a day to 79.41 million barrels, and OPEC contributed more than three-fourths of the increase, the agency said.

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