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
Latest headlines
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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.
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
Latest headlines
Get Alerted
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.
