Oil at 6-week highs, ponders possible OPEC cut

Reuters, 06.03.03, 4:36 AM ET

In SINGAPORE story headlined "Oil at 6-week highs, ponders possible OPEC cut" please read in the fifth paragraph... 13 million barrels... instead of...13 percent...and please read... nearly 40 million barrels... instead of... nearly 40 percent (corrects to millions of barrels from percent). A corrected repetition follows: (Updates prices)

SINGAPORE, June 3 (Reuters) - Oil prices held at six-week highs on Tuesday, as traders pondered whether the OPEC producers' cartel would trim supplies when it meets next week at a time when U.S. fuel stocks are low heading into peak summer demand.

U.S. July light crude rose as high as $30.86 a barrel, the highest since April 21. By 0608 GMT, July was eight cents higher at $30.79 following a jump of more than $1 in New York on Monday.

London's Brent crude was up 17 cents at $27.55 a barrel.

Traders are concerned gasoline inventories in the United States, where demand for motor fuel accounts for 12 percent of global oil consumption, will be insufficient to meet demand in the summer vacation season when road travel hits a peak. Recent government data showed U.S. gasoline stocks as of May 23 running 13 million barrels below a year ago, while crude inventories were nearly 40 million barrels below levels last year.

At the same time, Iraqi crude exports have yet to return to the world market despite the end of the war in April. Baghdad exported roughly 1.8 million barrels per day (bpd) of crude before the U.S.-led invasion in March.

But OPEC suppliers are considering possible production cuts at the June 11 meeting in Doha in preparation for a resumption in Iraqi oil flows.

Venezuela said last week the Organisation of the Petroleum Exporting Countries may reduce official output limits of 25.4 million bpd by one million bpd, but the decision hinged on the extent and speed of recovery of Iraq's oil industry.

Iraqi officials are targeting output of 1.5 million bpd by mid-June, roughly half of the country's pre-war production. Exports should account for about 50 percent of output.

Commodities strategist David Thurtell at the Commonwealth Bank in Sydney said at current prices OPEC may choose to delay any supply curbs rather than cause a further spike in prices.

"At these levels OPEC may put any further production cuts on ice. The risk reward for me is now getting close to a sell," said Thurtell.

"Any further cuts, which would mean a period of high prices, won't do anything for demand or the world economy, which is struggling," he said.