IRAQ's OIL OUTPUT has dropped by 800,000 barrels per day in recent weeks...

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WHAT spare parts? Anyone care to venture a guess?

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FOCUS-Oil falls as US stock swap plan lures bears (Updates prices, Richardson interview)

LONDON, Jan 31 (Reuters) - Oil prices fell on Monday after the United States said it might release crude to the market from emergency stocks amid concern about a worsening supply shortage.

News that Iraq's output had dropped by as much as 800,000 barrels per day (bpd) due to lack of spare parts did little to shake the bearish mood.

Benchmark Brent crude was trading 40 cents off at $25.28 a barrel, six percent off a nine-year peak struck 10 days ago but still 2-1/2 times its level during a price slump of a year ago.

Prices sagged after the U.S. government said it was considering making crude oil available to the market as part of a swap deal involving the nation's Strategic Petroleum Reserve.

``Potentially this makes the SPR an additional seller of up to four million barrels per day, the maximum that can be taken from the reserve, but the amount taken will depend as with any transaction on the terms of the deal,'' said Lawrence Eagles at GNI Research.

The long-term aim of the swaps plan is eventually to put more oil back into the SPR. But a short-term effect of any additional supply from swaps would be to lower crude oil prices.

Dealers interpreted the move as an attempt to ease a shortfall in U.S. supply and take the heat off buoyant prices hitting consumers in a presidential election year.

U.S. Energy Secretary Bill Richardson said the plan was not meant to pressure OPEC to raise output and lower buoyant prices.

But Richardson told Reuters the Clinton administration had yet to decide whether to go ahead with the plan which was at the stage of internal deliberations.

Richardson, who has voiced concern about the price rally, is on a diplomatic drive among OPEC producers and the cartel's allies such as Mexico to make clear his concerns about the pain inflicted on U.S. consumers.

Under the plan, oil firms would receive oil from the reserve and replace it later. The plan was being reviewed by the White House and a decision on the proposal could be made in two weeks.

The bearish reaction to the potential release of U.S. stocks was only partly offset by news of export problems in Iraq.

Taha Hmoud, the undersecretary of the oil ministry, said exports had dropped to as little as 1.5 million bpd, well below the 2.3 million bpd seen in recent weeks, due to a lack of spare parts and bad weather.

The news continued a spell of mixed signals for the oil market on price direction. OPEC is due to review its policy of supply restraint at a meeting in Vienna starting March 27.

But in the past two weeks it has offered mixed signals on what could happen.

Last week, Mexican Oil Minister Luis Tellez told a conference in Davos, Switzerland that producers would make efforts to ensure that oil supplies were not tight.

But a senior OPEC source countered by saying key producers were inclined to keep output cuts in place when the accord expires.

``We would not rule out a rise in March as part of an orderly and phased rise in the quota,'' said a research paper by Merrill Lynch.

(Note: this article is ``in progress''; there will likely be an update soon.)

-- Roland (nottelling@nowhere.com), January 31, 2000

Answers

Forgot the link...

biz.yahoo.com/rf/000131/up.html

-- Roland (nottelling@nowhere.com), January 31, 2000.


Found this...sorry if it was already posted. Didn't see it. ********************************************************

Saturday January 29 9:50 AM ET U.N. Team Ends Iraq's Oil Probe By LEON BARKHO Associated Press Writer

BAGHDAD, Iraq (AP) - A survey of Iraq's oil industry has shown that severe structural problems persist despite the arrival of millions of dollars worth of spare parts, Iraqi and U.N. officials said Saturday.

U.N. Secretary-General Kofi Annan sent a six-member team to inspect the industry and see what can be done to boost production and exports so Iraq can earn more money under a U.N.-approved oil program.

The experts, who arrived Jan. 16, toured the country's major oil fields and refineries and said the industry is ill-prepared for substantial increases in output and exports, the officials said.

The U.N. experts detected major deficiencies in infrastructure related to transportation, communication, storage capacity, power supply and safety measures, the officials said.

Oil Minister Amir Mohammed Rashid acknowledged Saturday that the industry was in a perilous state and that Iraq was putting production facilities at risk to sustain exports.

``We are really in a serious difficulty and we are in the phase which we call risky or critical,'' Rashid told reporters following a meeting with an Austrian trade delegation.

The experts still need to meet with Iraqi counterparts before submitting a final report to U.N. Secretary-General Kofi Annan.

The officials, speaking on condition of anonymity, said they expected the experts to urge Annan to agree to Iraq's request for spare parts worth $600 million under the current six-month phase of the oil program - double the currently allowed value.

Last year the U.N. Security Council turned down a recommendation by Annan based on the experts' findings in a similar visit in early June.

Iraq has so far earmarked nearly $1 billion for the repair of the industry under its U.N.-authorized oil sales of $5.2 billion every six months. But Oil Ministry officials say little more than $200 million worth of equipment has reached the country.

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-- Roland (nottelling@nowhere.com), January 31, 2000.


Excellent post Roland. Thankee.

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-- Squirrel Hunter (nuts@upina.cellrelaytower), January 31, 2000.


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