Opec seeks Mexico supply deal
NZoom> Oil prices rose above $US30 a barrel on Thursday as Opec producers Saudi Arabia and Venezuela prepared to seek assurances from non-member Mexico that it would follow the cartel in any move to tighten supply.
A meeting on Friday in Madrid between Saudi Oil Minister Ali al-Naimi and his counterparts, Venezuela's Rafael Ramirez and Mexico's Ernesto Martens, comes just days before next Wednesday's Opec meeting in Qatar to decide third-quarter cartel production.
The three countries were the architects of drastic oil output curbs in 1998 and 1999 which laid the groundwork for a five-year price boom, and are regrouping to prepare the ground for the resumption of Iraq's oil exports.
US crude futures jumped 69 cents to $US30.74 a barrel, nearing Wednesday's six-week peak of $US31. In London, benchmark Brent crude was 63 cents higher at $US27.44 a barrel.
"They aren't meeting to ask the Mexicans to pump more oil. So the question will be if they get Mexico to agree to cut," said a New York trader.
Iraq earlier on Thursday announced it was tendering to sell 10 million barrels of crude stored at export terminals, its first oil sales since the US-led invasion in mid-March.
Baghdad is aiming for some 1.5 million bpd of production by the end of this month, over half of that set for export, although continued looting in the southern region is hampering efforts to restart supplies, an official there said Wednesday.
"We believe that the market will continue to be surprised at the slowness of output recovery in Iraq and by the length of time before the security situation allows for a stabilisation of Iraqi capacity," said Paul Horsnell, an analyst with JP Morgan.
A full recovery to its previous over two million bpd exports - some four percent of globally traded oil - appears distant.
Some analysts believe Opec could opt to postpone any further cut in supplies as prices remain above its $US25 a barrel target, analysts say.
"Prices being where they are, we don't think they will do anything," said Leo Drollas at London's Centre for Global Energy Studies.
On Wednesday, Indonesian Energy Minister Purnomo Yusgiantoro said no cut was necessary as long as prices stayed within the group's $US22-$US28 price band. The Opec basket price stood at $US26.72 on Wednesday.
Oil markets have now recovered most of their losses following US governmentdata showing an unexpected rise in crude and gasoline supplies on Wednesday, somewhat easing concerns of a potential summer supply crunch.
Crude oil stocks jumped 2.8 million barrels in the week to May 30 while gasoline supplies rose 2.3 million barrels, the Department of Energy's statistical arm said.
Crude supplies are still down 11% against last year's levels, while gasoline is down 5%.