Opec urges members to respect quotas

April 22, 2003 By Sapa-AFP

Vienna - Opec, faced with falling oil prices in the wake of the Iraq war, is to call on its members to respect production quotas, an Opec official said on Tuesday.

The official said ministers from Opec's 11 member states would call at a meeting Thursday in Vienna for the cartel to hold to its current quota of 24.5 million barrels per day (bpd).

But analysts in Singapore said deciding how output should be reduced, and by whom, could prove difficult.

In London, oil prices held steady in early trading Tuesday. Reference Brent North Sea crude for June delivery fell seven cents to $25.78 a barrel in early deals.

New York's benchmark light sweet crude contract for May slipped 20 cents to $30.63 a barrel during out-of-hours electronic trading.

Traders said that fluctuations in the US price were largely caused by technical factors associated with the expiry of the May contract on Tuesday.

"The oil market is waiting to see what happens at the Opec meeting later this week," said analyst Andrew Whittock at Williams de Broe.

It remained uncertain what the cartel might decide on, said GNI trader Paul Goodhew.

"People are kind of expecting a cut of production of around one (million) to 1.5 million barrels per day, but what Opec actually gives us remains to be seen," he said.

Over the weekend, the president of the Organization of Oil Producing Countries, Abdullah bin Hamad al-Attiyah, said that the group must act to curb a surplus of two million barrels a day on the market since the Iraq war.

However, a dealer in Singapore with a regional trading firm, commented: "They (Opec) should not complain too much since oil prices have held at relatively high levels ."

Among the factors clouding the group's deliberations will be the continuing uncertainty over when Iraqi oil exports are most likely to resume.

Opec had announced in January an output increase, raising its combined output ceiling by 6.5 percent to 24.5 million bpd, to curb a surge in prices triggered by a strike in Venezuela and the threat of war in Iraq.

Since then, Opec members have produced over the quota as the price of oil soared up to $40 per barrel.

There is concern now that oil prices could collapse due to oversupply.

A return to the quota "is the most likely scenario" to seek to adjust prices, the Opec official said.

Opec seeks to have oil prices within a band of $22-$28 per barrel.

With Iraq's oil exports expected to begin flowing again following the US-led war to unseat the regime of Saddam Hussein, Opec has been anxious to avoid a plunge in global prices through oversupply.

However, analysts said there were fresh concerns over supplies from Nigeria, where violence has flared following a disputed presidential election.

Nigerian soldiers shot dead eight opposition supporters after coming under fire during an election day protest at the weekend, a police spokesman told AFP on Tuesday.

Last month around a third of all Nigeria's oil exports were halted due to civil and political unrest. - Sapa-AFP