Oil Prices Are Holding Steady Today

<a href=reuters.com>Reuters Wed April 16, 2003 08:28 AM ET

LONDON (Reuters) - Oil prices held steady on Wednesday after the U.S. military said Iraq's oilfields could be pumping at two-thirds of pre-war levels within weeks.

A question mark, however, still hangs over the return of Iraqi crude to the world market, dependent on a decision by a new political administration settling the management of exports.

Brent crude futures LCOM3 traded in London eased eight cents to $25.08 a barrel.

Colonel Michael Morrow, adviser to U.S. forces chief General Tommy Franks at Central Command in Qatar, told Reuters that Iraq's oilfields would be in a position to pump 1.6 million barrels per day (bpd) within eight weeks.

"Our job is to fix it, get it pumping and let the new Iraqi government decide how to handle the exports," Morrow said.

The resumption of exports could be delayed by uncertainty over who will have the legal authority to issue contracts under the United Nations oil-for-food program, which has overseen Iraq's crude exports since 1996.

"That will take a political decision," Morrow said. "And that's way above my pay grade."

Before the war, Iraq was producing 2.5 million bpd: 1.7 million bpd from its southern fields and 800,000 bpd from the north.

Iraq's giant northern Kirkuk oilfield was virtually untouched in the war, while the southern fields suffered some sabotage. The U.S. military said on Tuesday that the last blazing oil well had been snuffed out.

OPEC MEETING

A fall in oil prices was kept in check by expectations that the Organization of the Petroleum Exporting Countries, which controls more than half the world's crude exports, would cut output at a meeting scheduled for April 24.

OPEC producers who were able to do so, chiefly Saudi Arabia, have raised their output to compensate for recent outages from Iraq, Nigeria and Venezuela.

The cartel is now pumping about two million barrels per day (bpd) above its agreed ceiling of 24.5 million bpd.

But OPEC now fears further price falls in the second quarter, as demand tails off at the end of winter in the northern hemisphere and the war in Iraq winds down with the country's oil infrastructure largely intact.

"I believe there is a glut in the market," said OPEC President Abdullah al-Attiyah. "The surplus is two-plus million barrels per day."

"We will discuss how to manage this glut," he told reporters in Doha. "This is the main topic to be discussed."

Although ministers appear keen to cut back supply, whether this means reining in cheating or cutting back official limits remains unclear.

Further indications on the health of supply will appear later on Wednesday when the United States releases weekly oil stocks data.

Six analysts polled by Reuters predicted crude stocks grew by about one percent to nearly 280 million barrels and gasoline stocks were up 1.55 million barrels to 202.20 million.