July 4, 2003	Friday	Jumadi-ul-Awwal 3,1424

LONDON: Hopes in the West that the fall of Saddam Hussein would herald cheaper oil and boost the economy seem to have boomeranged with oil cartel OPEC emerging as a big winner from the war.

The conflict and chaos in Iraq have strengthened the hand of the OPEC by keeping prices high and supplies tight, analysts said on Thursday.

Far from threatening OPEC’s survival by opening up Iraq’s oil wealth to western companies, the war has so far fuelled uncertainty over oil supplies from the Gulf, injecting a fear premium to twitchy oil markets.

“It will be many years before Iraq comes back into the oil market in any significant fashion and that solves a problem for OPEC,” said Paul Stevens, professor of petroleum policy at Britain’s Dundee University.

“And in the sense that it has added to instability in the Arab world, the war has threatened security of supply.”

Iraqi oil output has been stuck at a quarter of pre-war levels since mid-May, as US attempts to reactivate the industry have been countered by pipeline bombings and looting of oil infrastructure.

The uncertainty has kept world oil prices simmering near $30 per barrel, a level that sets alarm bells ringing in the West because costly oil is like a tax on consumers and hurts growth.

RARE CHANCE: Iraqi delays have handed other members of the Organization of the Petroleum Exporting Countries a rare chance to capture market share at high prices. Analysts say that could last for the rest of the year.

Oil ministry officials in Baghdad, whose predictions have so far proved optimistic, now expect to reach two-thirds of pre-war output levels, or two million barrels a day, by year-end.

A quicker resumption of Iraqi oil exports would have forced other OPEC states to cut quotas by now and some analysts had predicted a price war in the cartel.

This would have delivered major dividends to the world’s richest nations, which would have seen their oil import bills slashed and economies boosted.—Reuters