Tuesday, September 26 4:45 PM SGT

Experts warn of oil supply disruptions as spare capacity dwindles

SINGAPORE, Sept 26 (AFP) -

Oil experts on Tuesday warned of the threat of oil supply disruptions as rising demand oustrips supply amid dwindling spare capacity.

Soaring oil prices and demand have also thrust new power into the hands of Iraqi leader Saddam Hussein, they said.

The experts attending a petroleum conference in Singapore said oil prices will continue to be volatile on soaring demand and inadequate supply.

"Global stocks are bound to remain low through the next two quarters of peak seasonal demand (in the northern hemisphere winter)," said Petroleum Argus Ltd. in its newsletter -- Argus Global Markets -- circulated at the conference.

Marcel Kramer, president for the Asia-Pacific operations of Norwegian oil trading firm StatOil, said: "There is a looming monster of an interruption of supply."

Argus said the world's spare capacity has fallen to 2.7 million barrels per day -- lower than Iraq's three million barrels a day output, making Baghdad a powerful market player.

"Saddam Hussein has the oil price in the palm of his hand," it said.

The Iraqi leader "now controls marginal supply," meaning that if Iraq halts output, "the industry would be hard pressed to replace the missing oil," it said.

Most producers have virtually no capacity to fill in any shortfall.

Only Saudi Arabia and the United Arab Emirates have the capacity to replenish any shortage if Iraq stops exports but it could take several months to bring the oil to consumers because spare capacity is located deep in the Arabian peninsula, Argus said.

"It would take up to three months for Riyadh to restart all its spare capacity. Even if spare tankers could be found, the oil would take over another month to get to consumer markets," it said.

Kramer of StatOil said "the situation is going to be one of continued volatility in the market.

"We will undoubtedly have to wait in particular (for) the severity of the winter in the western and northern hemispheres to see some of the effects in inventories as well as the behaviour of some consumer governments and some producer governments."

The decision by the United States to tap into their strategic oil reserves has eased crude prices but "for how long and to what extent is impossible to say at this stage," Kramer said.

Kramer said that despite the lessons from the oil crunch in the 1970s and 1980s, "contingency planning in Asia and strategic stockpiling are at best patchy."

He said Asian governments should step up consultations to deal with the rising costs which have stirred up political unrest and threatened to stall economic recovery.

"It is a fact that interdependence between Asian economies and between Asia and the rest of the world is growing, and that stable energy supplies are the lifeline on which we all depend."

Cross-border consultations on energy cooperation should be held, he said.

Senior trade officials and diplomats of the Asia-Pacific Economic Cooperation (APEC) forum who met in Brunei last week instructed an energy working group to draw up measures to reduce the region's heavy dependence in oil.

This includes energy conservation measures, developing alternative power sources and a scheme to tap into the oil reserves of members in times of emergency.

The group will meet in Lima, Peru next month and their report would be submitted to APEC leaders at their summit in Brunei in November where soaring oil prices is a key agenda item.

http://sg.dailynews.yahoo.com/headlines/asia/article.html?s=singapore/headlines/000926/asia/afp/Experts_warn_of_oil_supply_disruptions_as_spare_capacity_dwindles.html

-- Cave Man (caves@are.us), September 26, 2000

Answers

Saddam Hussein blasts Kuwait, Saudi Arabia

http://www.foxnews.com/world/092500/iraq.sml

-- Cave Man (caves@are.us), September 26, 2000.

Cave: I 'might' be the only one who thanks you for the posts, but I do like them....

BTW, it appears you are quite well at holding your own with the crp as well.

I asked in another thread re: saddam, thnks for the links.

-- consumer (shh@aol.com), September 26, 2000.

I'll second what Consumer said. Thank you, Mr. Cave Man.

-- Not Whistlin' Dixie (not_whistlin_dixie@yahoo.com), September 27, 2000.

C-man,

Kudos for your tireless work on firestarting.

-- flora (***@__._), September 27, 2000.