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Oil news

*       Funding shortfall for Iraq humanitarian programme forces cuts
(Agence France-Presse)
*       OPEC poised to cut output in order to lift oil prices (NY Times)
*       Blast on Sunday stops oil flow in Iraq-Turkey pipeline (Nando
*       Iraq says oil flow back (Associated Press)

The NY Times writes:
"Iraqi oil production is also stabilizing. In 1998 Iraq more than
doubled its oil production to 2.5 million barrels a day as the United
Nations allowed it to sell more oil under its oil-for-food sanctions
regime. That ceiling cannot increase much more now unless the United
Nations sanctions are removed altogether -- something the United States
would not allow." (NY Times).

Funding shortfall for Iraq humanitarian programme forces cuts 
00:02 GMT, 19 March 1999

UNITED NATIONS, March 18 (AFP) -A funding shortfall in a humanitarian
programme financed by Iraqi oil exports is forcing cutbacks on several
fronts including the telecommunications sector, a UN statement said
Thursday. The statement issued by the oil-for-food programme for Iraq
summarized a letter from the programme's executive director, Benon
Sevan, to the UN Security Council. Sevan detailed severe cuts already
implemented in the water and sanitation sector during the programme's
last six-month phase which ran until last November. He said that an
allocation of 174.5 million dollars to improve Iraqi water and
sanitation had been slashed to 35.3 million.

OPEC Is Poised to Cut Output, Lift Oil Prices
NY Times, 23 March 1999

VIENNA, Austria -- As they slipped out of their black limousines into
luxury hotels dotting the contours of Vienna's graceful Stadtpark Sunday
night, officials of OPEC, the nearly moribund oil cartel, were stirring
with new life, ready to jolt oil prices back up. 

If all goes well at an emergency meeting set for Tuesday here, the
Organization of Petroleum Exporting Countries, in partnership with major
oil producers like Mexico and Norway who are not members of the group,
will take more than 2 million barrels of oil a day out of world markets,
starting in April. It would mark the first time in 13 years that the
cartel has taken such a drastic measure, largely because of the pressing
needs of the largest producer, Saudi Arabia, and other producing
countries to generate more revenue, experts say. 

Anticipation of the move -- which has emerged as OPEC officials
formulated it in secret and in public talks held in Riyadh, The Hague,
Dubai, London and other cities in the last four weeks -- has already
pushed prices up 20 percent, bringing the American benchmark brand known
as West Texas Intermediate to $15 a barrel. This has halted, for a while
at least, the steady fall in prices that devastated the world energy
industry in the last year. 

Part of the impact reflects optimism in the oil industry that salvation
is on the way. In the last decade, globalization, competition from new
oil suppliers and disputes within OPEC combined to send oil prices into
a seemingly endless tumble to a point where gasoline and fuel prices
today are, in inflation-adjusted prices, the lowest since the end of the
World War II. Now, a confluence of new circumstances may help the cartel
reverse some of these trends. Among other things, the Asian economic
crisis, which erased more than 1.5 million barrels a day in demand for
oil, is stabilizing. 

Iraqi oil production is also stabilizing. In 1998 Iraq more than doubled
its oil production to 2.5 million barrels a day as the United Nations
allowed it to sell more oil under its oil-for-food sanctions regime.
That ceiling cannot increase much more now unless the United Nations
sanctions are removed altogether -- something the United States would
not allow. 

Above all, the pain of lower prices has piled mountains of debt onto the
economies of many oil-producing countries, cut their government budgets
down to a point of endangering social and political cohesion, and
ravaged oil company profits worldwide -- enough to create a consensus
for OPEC discipline and worldwide cooperation. 

"The worst seems to be over," said Robert Mabro, director of the Oxford
University Institute for Energy Studies in England. "They have to act
because low prices are deeply hurting producing countries and oil
companies. Hard currency revenues are shrinking dangerously in places
like Nigeria, Venezuela, Russia, Mexico. Multinational oil companies
have cut costs to the bone, laid off thousands of people and seen their
profits evaporate. Everybody wants a solution," 

Underlying the seriousness of the action, Saudi Arabia, the world's
largest oil producer and most important OPEC member, has agreed to take
the biggest cut, shutting down half a million barrels of oil a day of
its production starting in April. "As far as we are concerned, it's a
done deal," said a senior Saudi official in Riyadh, who asked not to be
identified. "We are informing customers right now that deliveries will
be cut." Iran, Kuwait, Venezuela, Algeria, Libya, Indonesia, the United
Arab Emirates, Qatar and Indonesia are joining in with cuts that total
about 1.5 million barrels a day. Norway and Mexico, major oil producers
and allies of the United States who are not members of OPEC, intend to
cut their production by a combined 350,000 barrels daily. This is a
remarkable show of solidarity unseen since 1986, when a similar collapse
in prices led producers to drastic and coordinated production cuts. 

While still frowning on any concerted action to control prices of such a
vital commodity, the United States appears not to object to stronger oil
prices, which would also help the American oil industry. It too has been
deeply hurt by the price collapse, resulting in the loss of thousands of
jobs. "We feel that lower oil prices are good for consumers, but we
recognize they can have a negative impact domestically and on some of
our friends like Venezuela and Mexico," Energy Secretary Bill Richardson
said in a telephone conversation from Washington on Friday. "So far,
OPEC's response has been responsible and restrained." 

It is Saudi Arabia, the cartel's undisputed master and America's staunch
Persian Gulf ally, that holds the fate of the accord in hand. As owner
of the world's largest petroleum reserve, Saudi Arabia had two ways to
go. "They could go back, as they have done now, revert to their old
standard of constraining production and hope that prices will go up,"
said Anthony Miles, senior vice president at the San Francisco office of
the Boston Consulting Group. "Or they can swing all the way, pumping as
much oil as possible, and the guys with the most oil will win." 

It will take some months to determine whether OPEC's new discipline will
hold. The big deterrent to cheating is Saudi Arabia's unique ability to
flood the market. With prolific oil fields, Miles and other experts
point out, the desert kingdom can pump more than 10 million barrels a
day at minimal extraction costs of $1 a barrel. This flooding would
bring prices down to as low as $5 a barrel in a few months. Few
oil-producing countries can take this possibility lightly. In the long
run, it would put many producers out of business in the United States,
the Caspian Sea, Russia and the prolific North Sea shared by Norway and
Britain, where production costs range from $5 to $10 a barrel. 

The Saudis' need to produce higher revenues has become compelling.
Piling one budget deficit over another in the last decade, Saudi Arabia
has accumulated a debt of $130 billion, the equivalent of its entire
annual economic output. As a result, after tenaciously clinging to a
level of production set since 1990 at 8 million barrels a day, Saudi
Arabia for the first time has offered to lower it to 7.5 million barrels
a day. This is a fundamental change in policy. "The eight-million level
was practically untouchable -- it had become an icon-hobbling policy,"
said Amy Myers Jaffe, a senior oil analyst at the Baker Institute at
Rice University in Houston. "The willingness to abandon it shows the
urgency they attach to higher revenues now."

Blast stops oil flow in Iraq-Turkey pipeline 

Copyright  1999 Nando Media
Copyright  1999 Associated Press

ANKARA, Turkey (March 21, 1999 3:20 p.m. EST
- An explosion damaged part of the oil pipeline linking Iraq to Turkey
on Sunday, cutting the oil flow, a pipeline official said. The cause of
the blast was unknown, said the official, speaking on customary
condition of anonymity from the site of the explosion in Midyat in the
southeastern province of Mardin. The blast caused a fire that was still
burning, although firefighters had stopped it from spreading, Mardin
Gov. Fikret Guven said. It was not clear when the flow of oil could
resume, said Guven. The damage seemed minor, but its extent would be
assessed Monday, he added. About half the oil Iraq exports flows through
the pipeline, some 1 million barrels a day. Guven said authorities were
not ruling out the possibility of sabotage. 

Oil transport between Iraq and Turkey resumed earlier this month after
U.S. warplanes attacked the Iraqi communications centers that controlled
the flow of the pipeline's oil.  Iraq has been barred from exporting oil
freely since U.N. sanctions were imposed in 1990 to punish Iraq for
invading Kuwait. Under a U.N. oil-for-food program, Iraq can sell $5.2
billion worth of oil over six months to buy food,
medicine and other humanitarian goods.

Iraq Says Oil Flow to Turkey Back 
By Leon Barkho, Associated Press Writer, Monday, March 22, 1999; 4:44
p.m. EST

BAGHDAD, Iraq (AP) -- Iraq resumed pumping oil through a pipeline via
Turkey on Monday, a day after an explosion damaged the oil line in
southeastern Turkey, an Oil Ministry official said.  Turkish authorities
have not ruled out sabotage as the cause of Sunday's explosion at Midyat
in the southeastern Turkish province of Mardin, which halted the flow of
oil. Kurdish rebels fighting for autonomy in southeastern Turkey have
targeted the pipeline in the past.  The Iraqi official, speaking on
customary condition of anonymity, said pumping resumed at a normal rate
Monday night.  About half the oil Iraq exports flows through the
pipeline, a total of about a million barrels a day. The rest goes via
ships from Iraq's southern Bakr port. 

In New York, John Mills, spokesman for the oil-for-food program, said
pumping resumed after Turkey diverted the oil from the damaged pipeline
to a smaller one, with a 40-inch diameter. He said repairs on the larger
line are under way.  The pipeline was briefly put out of commission
earlier this month when U.S. jets patrolling a ``no-fly'' zone over
northern Iraq hit a communications center that controlled the flow of
the pipeline's oil.

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