Analysts confident OPEC will shore up falling oil prices

channelnewsasia.com First created: 14 April 2003 1945 hrs (SST) 1145 hrs (GMT) Last modified: 15 April 2003 0557 hrs (SST) 2157 hrs (GMT) By Dawn Teo

Oil prices have dropped about 30 percent since the start of the war in Iraq, sparking concerns that a possible oversupply could cause prices to crash soon.

But analysts believe the Organization of Petroleum Exporting Countries (OPEC) can contain the fall.Advertisement They are banking on signs the oil cartel will decide to cut production when they meet later this month or in early May.

Crude prices continued sliding on Monday, down 1 percent in Asian trade, on prospects that Iraqi oil could start flowing in coming weeks.

The US is keen to see Iraqi oil pumping as soon as possible to help fund the country's reconstruction.

But that means trouble for other OPEC members, which have been bumping up supplies to counter disruptions from Iraq and other producers.

Ong Teng Tong, Senior Energy Consultant, Itochu Petroleum, said, "Even if they cut, we still think the oil prices may still go down because right now, Nigeria is probably back to normal production and Venezuela, there was a big strike about 2 months ago. They are practically back to normal."

There are problems on the demand side as well.

As winter draws to a close in the second quarter, demand for heating and therefore crude oil tends to fall.

What is worse, many airlines have slashed their routes due to the spread of the Severe Acute Respiratory Syndrome virus, so they are buying less fuel as well.

Still, many analysts predict oil prices will stabilise at between US$24 and US$26 a barrel.

That is roughly the mid-point of OPEC's own target range, which members like Indonesia and Algeria say, is achievable.

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