Saudi, Venezuela woo Mexico on oil output policy

Reuters, 06.06.03, 5:32 AM ET  By Tom Ashby MADRID, June 6 (Reuters) - OPEC producers Saudi Arabia and Venezuela were due to start talks with non-aligned Mexico on Friday to seek its contribution to future output restraints as Iraq returns to world markets, oil officials in Madrid said. Saudi Oil Minister Ali al-Naimi and Mexico's Ernesto Martens were awaiting the arrival of Venezuela's Rafael Ramirez for an afternoon meeting, they said. "These talks are about keeping non-OPEC on board. We want their participation in any future cuts should prices fall," said one official. No firm agreement on output is expected from Friday's talks. But Riyadh and Caracas will want to lay the groundwork for contributions from non-OPEC should the return of Iraq push prices down later this year, the officials said. "This is a sign that OPEC is saying: 'Either we go together or there is nothing'," an official from one of the countries said. In late 2001, OPEC agreed to a hefty output cut on condition that rival exporters Mexico, Norway and Russia contribute. All three joined the plan when prices started falling. The Madrid meeting comes ahead of next week's OPEC gathering in Qatar to decide third quarter cartel production. With oil prices near the top end of OPEC's $22-$28 a barrel band, traders say there appears no need for OPEC to cut supply immediately. Non-OPEC producers have been invited as observers in Qatar. The alliance between Saudi, Mexico and Venezuela dates back to the drastic output curbs of 1998 and 1999 that since have pushed prices above $25 a barrel on average for Brent. Saudi's Naimi fired a warning shot to non-OPEC this week at a conference in Azerbaijan where he called on emerging Caspian producers to cooperate on output policy or risk $10 crude. Iraq, recovering from the U.S.-led war, announced earlier on Thursday it would resume oil exports in the middle of the month. Mexico has been walking a tightrope between cooperating with OPEC to keep prices and revenues buoyant, and not upsetting the United States or hurting the world's largest economy. Foreign Minister Luis Ernesto Derbez said last month that Mexico's link with OPEC would weaken as North America becomes more of a single energy market. The message sent ripples of concern through OPEC. Venezuela's Ramirez plans to visit non-OPEC Norway to discuss output cooperation before arriving in Qatar for the June 11 OPEC meeting.