OPEC Plans to Rein In Members' Production Levels

By ERIC PFANNER <a href=www.nytimes.com>NYTimes.com-International Herald Tribune

VIENNA, April 23 — Amid fears of a postwar oil glut, members of the Organization of the Petroleum Exporting Countries prepared today to cut output significantly in an effort to bolster prices ahead of the eventual resumption of Iraqi exports.

The swift execution of the war in Iraq has OPEC worried about a collapse in prices, even though Iraq's oil industry remains in disarray. While Abdullah al-Attiyah, the OPEC president, said he hoped that Iraq would eventually return to "play a very important role" in the organization, he added that the country would not be discussed, or represented, at OPEC's meeting on Thursday. Advertisement

Instead, analysts said, the 10 other members of OPEC will probably agree to cut production by as much as 2 million barrels a day, though they are unlikely to cut their official production ceiling of 24.5 million barrels. That limit, representing about a third of the world's oil consumption, was breached over the last few months as OPEC members, led by Saudi Arabia, moved to prevent a spike in prices during the war.

"We will discuss all options," said Mr. Attiyah, who is also Qatar's oil minister, as he arrived at the Intercontinental Hotel in Vienna. "Personally, I believe there is a two million surplus in the markets."

Reflecting a declared desire to manage the markets and keep prices stable, OPEC agreed in January to raise its production quota by 7 percent as war loomed and political strife in Venezuela, normally the group's third-largest producer, curtailed its output. But OPEC members actually pumped about 1.7 million barrels a day more than the official limit in March, according to PetroLogistics, a consulting firm in Geneva, and prices have eased after climbing in light of the war.

"OPEC knows it has been through an exceptional period," said Raad Alkadiri, a director at PFC Energy, a Washington consulting firm. "Now that the war is over, they realize they have to get back to the quotas."

On Wednesday, after a report showing a sharp rise in United States stockpiles, crude oil prices fell sharply in trading in New York, down $1.34, to $26.65 a barrel. OPEC's stated goal is to keep the price of a basket of crudes at $22 to $28 a barrel, and it is now in those bounds.

But the uncertain course of the global economy has made it particularly difficult to predict consumption totals. Adding to the uncertainty, Iraq is expected to step up production as wartime damage to production sites is repaired and Western oil companies help tap what experts say are the world's second-largest oil reserves, exceeded only by Saudi Arabia's.

Though some oil started flowing again today from Iraq's southern oil fields, that is for domestic consumption, and any significant resumption of exports is weeks or months away, analysts say.

A variety of political issues must be addressed. United Nations sanctions, which have restricted Iraqi exports since the first Persian Gulf war, in 1991, remain in place for now. And it is still unclear how Iraq's oil industry will be organized, or even who owns the oil fields, with no effective transitional government yet in place.

While Iraq has remained one of OPEC's 11 members since its invasion of Kuwait 13 years ago, it has been outside the group's quota system, as its exports were monitored under the United Nations oil-for-food program.

"We don't have a government today in Iraq, so we don't have any representative," Mr. Attiyah said.

OPEC's program for the meeting, prepared during the war, still lists Amir Muhammad Rashid, oil minister in Saddam Hussein's administration, as Iraq's official representative to the cartel. But he is also included in the deck of playing cards depicting 55 members of the regime sought by the United States, and his whereabouts is unknown.

Over the weekend, a former Iraqi general, Jawdat al-Obeidi, said he would represent Iraq at the meeting, but analysts said no gate-crashers were likely to arrive in Vienna.

"Whoever would have been here, it wouldn't have changed a thing," said Vera de Ladoucette, a senior director at Cambridge Energy Research Associates.

Indeed, OPEC ministers arriving in Vienna sought to portray the discussion of Iraq as a sideshow. For now, they emphasized, the group's focus was on oil prices, not politics.

"This meeting is to make sure we keep the market where it is, to make sure prices stay in the band, preferably right in the middle," the Saudi oil minister, Ali al-Naimi, told reporters. "OPEC should be given a big credit for putting as much crude as we have done into the market."

By pumping at full tilt during the war, Saudi Arabia sought to portray itself as the responsible citizen of the oil community, analysts say, regardless of the eventual effect of the conflict on the market.

For that reason, these analysts said, Saudi Arabia would probably try to abide by any new production limits for now, even though OPEC members have frequently cheated on quotas, and doing so, in the case of Saudi Arabia, has provided a recent windfall.

While Mr. Attiyah said he hoped Iraq would remain an OPEC member, some advisers in Washington have suggested that the group's leverage over oil prices could be weakened if a new, pro-American government in Iraq steered a course independent of OPEC. Iraq, together with Russia, where output is rising, could then form an effective counterweight to the organization.

But analysts say it could take years just to get Iraqi production back to where it stood before the 1991 war, when the nation pumped more than three million barrels a day, without even tapping the potential of its huge reserves.

"It's going to take a long time to get Iraq up to speed," Mr. Alkadiri said. "In the short term, it will be sort of a marginal issue for OPEC."