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To: Softechie who wrote (5231)	1/28/2003 3:44:50 PM
From: Softechie	Read Replies (1) \| Respond to of 29601

THE SKEPTIC: Saudi Oil Rides In, But Not To The Rescue 28 Jan 10:02 By Selina Williams A DOW JONES NEWSWIRES COLUMN LONDON (Dow Jones)--Could Saudi Arabia and OPEC prevent skyrocketing oil prices if war disrupts Iraqi crude exports? Don't bet on it. After all, the Organization of Petroleum Exporting Countries - together with its largest producer and de facto leader - will have a double-whammy to contend with - Iraq and Venezuela. Don't forget how much of an impact OPEC's recent pledge to deliver an additional 1.5 million barrels a day of oil into the market had on prices. Almost none. The promise of extra oil didn't even stall a price rise - European benchmark Brent is still over $30 a barrel, even with OPEC and non-OPEC producers pumping at close to peak capacity. That's why oil-revenue dependent Saudi Arabia is just as concerned as the leaders of other struggling economies about the knock-on effect of high oil prices. Instead of raking in more money from higher prices, oil at $30 a barrel chokes economic growth and caps demand for crude. It thus hits the budgets and finances of oil-rich, but oil-revenue dependent, economies such as Saudi Arabia and most of the other OPEC member nations. There are already signs that last year's high oil prices retarded economic recovery in the U.S. - one of OPEC's main markets. Unfortunately, it isn't clear what more Saudi Arabia can do to curtail a burgeoning crisis. Within OPEC, Saudi Arabia has the most spare capacity, but there is a limit to how much and how long higher output levels can be maintained. Saudi sources say production is already close to 9 million barrels per day. Another 1.5 million b/d and that's maximum output - an uncomfortable level that could damage some oil fields in the long term. True, the U.A.E. has spare capacity, but not a lot, something like 350,000 b/d. A pittance, really. Non-OPEC Russia can't add much more oil to the market thanks to restricted export capacity and Norway is peaked out. Enter Venezuela into the equation and the possibility of a military strike on Iraq, and the situation becomes dire. Yes, there have been breakthroughs in ending the strikes in strife-torn Venezuela and production is up. But some fear the damage to fields could lead to a permanent output reduction of close to 20%. And the country is still politically unstable. Iraqi uncertainty is no secret. Only last week, Saddam Hussein threatened to set his oil fields alight if the U.S. invades. Kuwaiti oil fields burned for nine months after the Gulf War and it took almost a year to restore production to pre-war levels. A similar scenario in Iraq would be disastrous for oil prices, because up to 2.5 million b/d would be taken out of the market. OPEC might not be able to offset this gap. Worse, this unpleasant scenario assumes Kuwaiti fields don't fall victim to Iraqi attacks. So, while U.S. and U.K. politicians continue to pump up the volume on political rhetoric, there will be little to stave off an oil - and oil stock - crisis if the worst-case scenario unfolds. -By Selina Williams, Dow Jones Newswires; 44-20-7842-9262; selina.williams@dowjones.com (END) Dow Jones Newswires 01-28-03 1002ET