Oil Prices Weaker on Iraqi Export Nerves

Thu May 29, 2003 07:25 AM ET

LONDON (<a href=reuters.com>Reuters) - World oil prices fell further on Thursday, rattled by the prospect of a swift return of Iraqi exports which overshadowed depleted oil stocks in the United States and OPEC signals of a fresh output cut.

International benchmark Brent crude oil fell 12 cents to $25.47 a barrel, having lost a hefty 74 cents on Wednesday.

U.S. crude futures fell 19 cents to $28.39, having touched a five-week high near $30 on Tuesday.

"Iraqi production does seem to have recovered to some extent and there is some nervousness ahead of OPEC's meeting in Qatar on June 11 -- but I think they will take a pragmatic decision and accommodate higher Iraqi production," said Steve Turner of Commerzbank.

Iraqi oil officials expect exports to resume in two or three weeks after repairs to oilfields, refineries and pipelines damaged by looting and war.

The first barrels are expected to come from storage tanks, but a steady flow of freshly produced crude is expected to follow swiftly as output is rising fast.

Dealers were also awaiting fresh market direction from U.S. energy stock data later in the day.

Analysts polled by Reuters expect the data to show only very slender gains, with crude stocks rising a meager 140,000 barrels and gasoline by 175,000 barrels, which would still leave inventories considerably below year-ago levels.

Stock indications are crucial because in summer U.S. gasoline demand peaks, accounting for 12 percent of global energy consumption as holidaymakers hit the roads in their cars.

"The high builds in stock levels that were expected earlier in the year just haven't materialized, and the market could be fundamentally tighter than had been thought in the third quarter," said Turner.

OPEC member Venezuela said on Wednesday the group could slash up to a million barrels per day of output at the forthcoming meeting.

OPEC has already agreed last month to cut back on excess supplies pumped ahead of the war in Iraq, with cuts taking effect on June 1.

The International Energy Agency, the West's energy watchdog, said the cartel should resist calls for cuts at the June 11 meeting and help replenish lean industry stocks.