Pressure for OPEC to cut oil production increases ahead of emergency talks --Venezuela urges action on oil 'oversupply'

By Bruce Stanley, Boston.com-Associated Press, 4/24/2003 08:18

VIENNA, Austria (AP) Pressure on OPEC to cut its crude production mounted Thursday when Venezuela's oil minister added to other cartel members' calls for action to soak up a perceived excess in global supplies.

Representatives of the Organization of Petroleum Exporting Countries gathered in Vienna for hastily arranged talks to reassess the group's output levels now that the war in Iraq is over.

Several OPEC members who boosted their production before the war to head off a possible supply shortage worry that they now are pumping too much crude just as seasonal demand is drying up. Prices have tumbled from a pre-war high of almost $40 a barrel for U.S. crude in recent weeks, and OPEC fears a further decline if it doesn't rein in production soon.

OPEC president Abdullah bin Hamad Al-Attiyah has argued that oil producers are already pumping 2 million barrels a day in excess of the world's needs. Venezuelan oil minister Rafael Ramirez appeared to agree.

''It is important to reduce oversupply,'' Ramirez told reporters. ''We have to have more discipline, and it is important to take measures and remove that amount from the market.''

If not, OPEC wouldn't be able to maintain its price target of $25 a barrel, he said.

Many energy analysts expected OPEC to agree to curb production. The question was whether OPEC would try do so by lowering its official output target or by taking the much less drastic step of reining in the amount of oil its members were pumping above their respective quotas.

On Thursday, contracts of U.S. light, sweet crude for June delivery were trading in New York at $26.85 a barrel, up 20 cents from Wednesday's close. In London, June contracts of North Sea Brent crude were trading at $24.52, up 26 cents a barrel.

Although OPEC's official output target is 24.5 million barrels a day, the group pumped an average of 26.2 million barrels in March, according to estimates compiled by investment bank J.P. Morgan.

United Arab Emirates' Oil Minister Obaid bin Saif Al-Nasseri was among those voicing support for OPEC to take steps to reduce supplies and avert a price crash.

The prospect of an eventual revival in Iraqi crude exports was a key factor in OPEC's decision to call its emergency meeting. Indeed, Iraq's eventual reintegration into the group it helped found 43 years ago colored the calculations of every oil minister arriving for Thursday's talks.

Iraq's enormous oil reserves make it a force to be reckoned with as it rises from the ashes of war to assume its rightful position as one of the world's major crude producers.

Yet Al-Attiyah, the OPEC president, insisted Iraq wasn't on the agenda, and for the first time in the cartel's history, no one even planned to represent Iraq when the delegates gathered.

All this has served to perpetuate Iraq's role as the biggest wildcard among OPEC's 11 member countries. With a new government yet to take shape in Baghdad, the speed and timing of a resumption in Iraqi oil shipments is one of the biggest unknowns for OPEC.

A sign of recovery for Iraq's lifeblood oil industry came when modest amounts of crude began flowing Wednesday from Iraq's Rumeila South oil field to a storage tank near the southern city of Basra. It was the first time since the war that oil coursed through the country's largely undamaged pipelines.

''The volumes are very limited, and they certainly don't suggest an imminent resumption of Iraq's exports,'' said Raad Alkadiri, an Iraq specialist at The Petroleum Finance Co., a Washington consultancy. All the same, he said, ''It's a start.''

Analysts and U.S. military engineers say Iraq, with 112 billion barrels of proven reserves, could resume overseas crude shipments within weeks.

OPEC pumps about a third of the world's crude. To keep control of oil production, it will eventually need to finesse the potentially explosive task of accommodating Iraq's future output, probably by having other members reduce their own production.

OPEC delegates billed their talks as consultations rather than a formal meeting a nicety that enabled OPEC to avoid holding an official session where Iraq would have been represented only by a miniature flag and an empty chair.

The lack of a recognized Iraqi government meant that no one from Baghdad would be attending. The cultural attache at the Iraqi embassy in Vienna had done so at two previous group meetings, but he turned down an invitation to participate again, an OPEC official said.