Oil Above $30 Ahead of OPEC Meeting

<a href=reuters.com>Reuters Mon April 21, 2003 10:15 AM ET

NEW YORK (Reuters) - Oil prices held above $30 on Monday ahead of this week's OPEC producer cartel meeting which is expected to tighten crude supplies as fuel demand dips to the lowest point in the year.

U.S. light crude CLc1 in New York stood 18 cents lower at $30.37 a barrel. Trade in Brent crude on London's International Petroleum Exchange was closed for the Easter holiday.

The Organization of the Petroleum Exporting Countries will meet in Vienna on Thursday for an emergency meeting called after oil dropped about 30 percent in a month as Middle East oil flows escaped severe disruption from war in Iraq.

Oil prices rebounded late last week as Iran called on OPEC, which controls over half world oil exports, to cut official production quotas warning that failure to rein in supply could trigger a price collapse.

Other OPEC members have said tighter compliance to official output limits would probably be enough to avoid a supply glut.

OPEC pumped more than 1.5 million barrels per day (bpd) over its self-imposed 24.5 million bpd production ceiling in March as it raised output to counter the loss of Iraqi supply and earlier disruption from a strike in Venezuela.

Iran's Oil Minister Bijan Zanganeh on Monday said OPEC's quota busters should be the first to restrain output. "All those that have increased their output in an unusual way, they should also be the first to decrease their production," the Aftab-e Yazd newspaper quoted Zanganeh as saying.

ECONOMIC WEAKNESS

Oil prices have risen back above $30 -- the level that some economists warn can hurt economic growth -- on the month-long absence of Iraq's crude exports, halted since the start of the U.S.-led offensive.

U.S. inventories of crude and refined products are still below normal levels heading toward the U.S. summer vacation driving season when gasoline demand peaks.

"With market attention firmly focused on the forthcoming OPEC meeting, we expect oil prices will remain well supported given recent statements from member countries indicating a desire to curtail physical supply," said Matthew Warburton of UBS Warburg bank in a research note.

The question of Iraq's representation at the OPEC meeting was muddled on Monday, with Jawdat al-Obeidi, a former Iraqi general who says he is deputy governor of post-war Baghdad saying he would lead a delegation to the OPEC meeting.

The U.S. government said it does not recognize Mohammed Mohsen al-Zubaidi, who has declared himself governor of Baghdad, and therefore his deputy cannot represent Iraq at OPEC.

In a sign Iraq's oil sector is beginning a post-war recovery, Iraqi oil officials said on Monday the country's key oil refinery Daura in Baghdad had started operation at half capacity of 40,000 barrels per day.