Crude prices fall 5 per cent as Saudis warn of looming oil glut

<a href=news.independent.co.uk>news.independent.co.uk By Philip Thornton Economics Correspondent 24 April 2003

Oil prices slumped 5 per cent yesterday as record import volumes boosted US crude stocks, increasing pressure on the producers' cartel Opec to reduce production at today's emergency meeting.

The drop came as Saudi Arabia, the world's largest oil producer and an Opec member, warned of the prospect of a glut in supply and urged a cut in production quotas.

Prices slumped after the US said stocks jumped 9 million barrels, or 3 per cent, last week as crude imports hit the highest level on record at 10.6 million barrels per day.

News of rising supply in the world's biggest consumer came as Opec prepared to reduce its production ahead of the return of Iraqi crude exports to the world market.

Opec, which holds an emergency session in Vienna today, increased output to prevent a price surge during the war in Iraq, but is now trying to stop crude dropping beneath the floor of its target range of $22 (£14) to $28 a barrel. Oil prices in New York dropped $1.54 to $26.45 a barrel yesterday, the lowest level in a month and taking falls this week to $4 or nearly 13 per cent. In London Brent prices fell $1.24 to $24.22 a barrel.

Saudi Oil Minister Ali al-Naimi, said: "We are concerned if we don't take some steps, an oil glut may form. This meeting is to make sure we keep the market where it is."

Abdullah bin Hamad al-Attiyah, the Opec president, has said the surplus may be more than 2 million barrels a day – 8 per cent of the current 24.5 million quota.

Obaid bin Saif al-Nasseri of the United Arab Emirates said Opec should tackle the 1.7 million barrels that the 10 nations pump out every day on top of the quota – a position backed by Venezuela. "I think we have to tackle first compliance," he said.

Iran has called for a cut in the headline quotas as well as tightening compliance.

Iraq will not be represented at the meeting, as the US has not yet set up an interim authority to govern the country.