I think we are spending our time and energy trying tp protect institutions that may just be working on paper.
This article makes me think we have a seat at OPEC and settle things in the Pre-Meeting.
BIRD ON OPEC: Saudi, US To Play "Pump It Up" For Oil Mkt
By DAVID BIRD
Of DOW JONES NEWSWIRES
VIENNA -- Seems like everyone's heading here these days.
Fresh from trying to temper U.S. plans at the United Nations for a war on Iraq, Mohamed ElBaradei, the head of the International Atomic Energy Agency flew back to his headquarters Sunday.
Aboard the flight were dozens of Cincinnati Ben-Gals, the perky pom-pom girls that try to stir crowds to cheer for one of the worst American football teams, the Bengals. The cheerleaders are on their way to boost morale of U.S. troops in Kosovo and Bosnia, now long forgotten in the march to a new Gulf War. They may be well suited to the job, with experience in shining light where there's gloom, as the baleful Bengals have won just 29% of their games since the last Gulf War.
But the serendipitous surprise guest this week is none other than U.S. Energy Secretary Spencer Abraham, who happens to be in town just as OPEC ministers are gathering for policy talks Tuesday amid a market crisis and the highest crude oil prices since Iraqi President Saddam Hussein had troops in Kuwait.
Abraham, who has repeatedly said the U.S. "won't beg" for oil from the Organization of Petroleum Exporting Countries, now puts a higher profile on his penchant for "quiet diplomacy." Abraham's approach, until now, has been behind-the-scenes talks, a deliberate contrast with the aggressive overtures of his predecessor, Bill Richardson, in the Clinton administration.
Richardson, who OPEC officials say confided in them that his higher political ambitions were behind his big-footed approach, used shuttle diplomacy to OPEC capitals to call for increased production. He once famously telephoned the OPEC president in his hotel suite just as a ministerial meeting was starting, in a final push to make sure his message was clear.
But unlike Richardson's moves to coax ministers into putting more oil into the market, Abraham's message may be that the U.S. is ready to put oil into the market to cool down prices.
Abraham says he's planning to meet some ministers on the sidelines the OPEC meeting, and will seek to assure them that the U.S. isn't planning to take over Iraq's oil - or its seat at OPEC - as it moves to oust Saddam.
The real business, though, will be to try to straighten out the muddled oil market.
Crude oil prices have soared to near $40 in recent weeks, and still hover near $38, purely on fears that oil supplies from a wider swath of the Persian Gulf oil patch will be jeopardized when a war starts in Iraq.
So far, OPEC hasn't succeeded in giving markets succor, despite boosting output well above agreed levels and making optimistic noises about doing more if needed.
But worries that OPEC is near the end of its tether, once just soft whispers, are being increasingly public, leading to an inevitability that the U.S. and its partners in the International Energy Agency will open emergency oil stockpiles to cool down prices.
In a candid, if somewhat contradictory, statement on Friday, the IEA said Abraham and its executive director, Claude Mandil, agree that "the world oil market today is stretched nearly to capacity."
In other words, there's nothing out there that can be produced that isn't being produced.
"Who's holding back barrels at $40?" asks a senior OPEC delegate. "Every drop is in the market."
But, without addressing how more can be given when the well is essentially dry, the statement acknowledges "producers' willingness to increase production if necessary to address any further supply disruptions."
The crux of the statement is the assurance that the IEA members, which hold 4 billion barrels of strategic oil reserves, are committed "to make additional volumes of oil available to the market to reinforce producers' efforts if needed."
Virtually all oil traders are expecting the 600 million-barrel U.S. Strategic Petroleum Reserve and other IEA tanks to be tapped, and are poised to send prices crashing in what could be a repeat of the start of the January 1991 Gulf War. Back then, oil prices fell by more than $10.50 a barrel, or about one-third, when the SPR was opened and the war was proven to be heading to a lopsided U.S. victory. A similar drop today would leave prices just over $25 - back in OPEC's comfort zone.
OPEC is ambivalent toward that prospect. Ministers know they have few barrels left but are anxious to see prices back in a normal range that would help the global economy and rekindle demand.
The group's own forecasts show that real demand for OPEC oil and movements from stocks in the current quarter is around 25.4 million b/d. Production estimates for January and February, which include Iraq, and projections of March output - minus Iraq - of around 25.3 million b/d - have OPEC covering that demand.
If, by slim chance, the Iraqi situation ends peacefully, without a cut off of Iraq's 2.4 million b/d, total OPEC output would be near 27.7 million b/d this month, heading into the weak second quarter, when demand is expected to drop to below 23 million b/d.
Even with an acute need to rebuild historically low oil inventories, that potential oversupply, approaching 5 million b/d, would send prices down below $20.
But because a peaceful solution is only wishful thinking, OPEC's seeking middle ground and a soft landing.
As reported, Saudi Arabian officials told Western government and oil officials in recent days that the kingdom's crude oil output has reached its limit at around 9.2 million b/d and won't rise further, even with a war looming in Iraq. The sources said, too, that there's an understanding that a release from government stockpiles is inevitable.
The Saudis have maintained they have capacity to pump as much as 10.5 million b/d, but haven't produced at that rate in more than two decades, and have let it be known they don't intend to take steps to push output to that level, because they don't think it will be needed.
That leaves OPEC this week pledging to do - at the start of a war - what they're already doing, pumping up output to cover a loss from Iraq and keeping fingers crossed for a quick result and no damage to neighboring oil operations.
But that pledge alone won't bring prices down, hence the need for the release of the reserves, which can be in markets in 10 days and will be a hammer blow to large commodity fund speculators already poised for the exit.
Despite admonitions that the U.S. won't use the SPR to bring prices down, an Iraqi cut-off presents a de facto supply shortage that provides the cover to open the taps and get prices back to politically acceptable levels.
For Abraham, who's known to take his folk guitar with him for private moments of relaxation on long international trips, he might want to practice from the Elvis Costello or Eric Clapton songbooks.
It's not hard to imagine a duet with Saudi Arabia's Oil Minister Ali Naimi, espousing a harmonious version of Costello's 1978 punk hit "Pump it up...when you don't really need it," or Clapton's more mellow lyric "Let it flow...".
- By David Bird, Dow Jones Newswires, david.bird@dowjones.com .
Technology has changed so many things.
Especially things that may be evident only on paper.
Sadly, those most affected are waiting for the hard copy of the rule changes.
Rascal@ everythingchanged.com |
