17-03-03 Saudi Arabia, the world's No. 1 oil producer, in recent weeks has chartered a fleet of supertankers to hurry nearly 1 mm bpd more oil across the Atlantic Ocean to its best customer. But the armada to the United States, which has ratcheted Saudi production close to capacity, hasn't dampened oil prices nor quelled concern over the economic impact of war with Iraq.
Analysts view the leasing spree as unprecedented in recent years. Even though state-run Saudi Aramco owns one of the world's largest supertanker fleets, in the last month it has leased enough ships to carry an extra 950,000 bpd. That's the most the Saudis have chartered in four years and a 240 % increase over 2002, according to Roy Mason, of Oil Movements, an England-based consultancy.

With already high gas prices and record-low oil inventories, the US oil market is in a precarious position as the country moves closer to a war that could temporarily cut imports. It's in the Saudis' interest to shore up supply.
"They don't like the US price at $ 40 a barrel," says Bjorn Dingsor, an analyst with Norwegian Energy in London. "Energy is a fuel for the economy, and if it gets too expensive, it slows down both the economy and use of energy."
The price of oil has moved relentlessly upward, first because of a political crisis in Venezuela that cut exports from that important supplier, and now because of economics. Big oil companies have no incentive to buy and store crude oil because today's price is high, while futures market activity indicates the price will drop months from now, assuming a quick war with Iraq.
"The Saudis realize that if they want more oil on the market, they have to do it themselves," Dingsor says.

If hostilities break out, conventional wisdom holds that Saudi oil is safer in tankers out of the Persian Gulf on the 50-day westward journey in open seas. Not only does Saddam Hussein's record include sabotage of Kuwait's oil fields, but terrorist threats have increased. An explosives-laden boat rammed a French tanker off Yemen's coast in October, and last summer Saudi Arabia arrested al Qaeda sympathizers it said tried to blow up its huge Ras Tanura oil terminal.
Should the threat of an Iraq war dissipate, or should war be brief with no oil facility damage, then the Saudi shipments inevitably will sink US oil prices, analysts agree. But if war disrupts imports, the spare Saudi oil may not prevent prices from spiking still higher. Says Mason, "Whatever the Saudis are putting into storage on the water is unlikely to cover more than a couple of months"-- not enough time for repairs and restoring production.

Ron Gold of the Petroleum Industry Research Foundation notes that increasing Iraqi exports in recent weeks "have made a significant contribution to avoiding worse problems in the oil markets. You lose that, you have to basically employ every ounce of spare capacity to make that up."
He believes the use of the US Strategic Petroleum Reserve will prove important to preventing an economic oil shock, although the Bush administration is reluctant to tap into emergency stores except in extreme situations.