In Iraq, relief that the southern oil fields, accounting for 1.2 million barrels a day (b/d) of capacity, had been secured with minimal damage was tempered by the apparent slow progress of the campaign. June contracts were trading at a premium of $1.71 over May on 1 April in expectation of a longer Iraqi outage. A military spokesman said on 27 March that three months of repair work would be needed on the southern Rumaila field before production could resume.
Nigeria also remains a worry for the market. Although a general strike scheduled for 1 April was called off at the last minute, fears are growing that the mid-April elections will be marred by violence, making the imminent reopening of foreign oil companies’ facilities in the volatile Niger Delta region unlikely. ChevronTexaco Corporationhas shut in 440,000 b/d of Escravos capacity while 50,000 b/d of Bonny Light and 320,000 b/d of Forcados have been lost from the Royal Dutch/Shell Group’soutput in the country. The problem is less the number of barrels lost than the fact that they would have contained sweet light crude. Increases in Saudi Arabian output and a restoration of Venezuelan production have eased overall supply fears, but both countries produce sour grades.
OPEC has so far managed to make up the twin shortfalls. ‘We have seen a substantial increase in OPEC 10 production, more than enough to compensate for losses in Iraq and Nigeria,’ said US energy secretary Spencer Abraham on 31 March. At 9.56 million b/d, Saudi output reached its highest level for 21 years in March, according to industry consultants Petrologistics. The US has taken advantage of the lower oil prices since war began to increase imports to more than 9.5 million b/d and rebuild stocks, which fell to historic lows in the first quarter. US crude stocks were up 2.5 per cent to 280 million barrels in the week ending 28 March.