RPT-Low stocks seen putting off an OPEC oil cut

Reuters, 06.09.03, 8:55 AM ET By Tom Ashby DOHA, June 9 (Reuters) - OPEC gathered in the tiny Gulf state of Qatar on Monday amid signs the cartel will stay its hand on cutting output in an effort to refill depleted oil inventories in the West. Stocks have stayed low after two months of zero exports from Iraq, the world's seventh largest exporter before the U.S.-led invasion, despite big output hikes from other members of the 11-member cartel. "When there was perhaps some overproduction, the low stock levels captured some of the oil. Now we have to see how low those stocks are," OPEC Secretary-General Alvaro Silva told reporters here ahead of Wednesday's meeting. With prices at the top end of OPEC's $22-$28 per barrel target range, Indonesia and Venezuela have said there is no need for any cut now from its 25.4 million barrel a day ceiling. Silva said OPEC's previous meeting in April, which raised quotas to cover for Iraq's export halt, had kept prices steady, with OPEC's latest basket price at $26.77 per barrel. "We are going to see what measures should be taken; if we should keep things as they are, if we should make an adjustment, a cut. I can't yet say which," he told Reuters. RIVAL EXPORTERS The Middle East-dominated cartel, which controls half of world exports, will most likely use the Doha meeting to prepare the ground for a possible cut later this year when Iraqi output is expected to rise. "With prices where they are I don't think OPEC will do anything," said Nauman Barakat, a broker at Fimat International Banque. "They will probably call another meeting once Iraq comes back and rope in non-OPEC to do its bit," he added. OPEC has invited rival exporters including Mexico and Russia to Qatar, hoping to maintain a fragile partnership that has kept OPEC's basket near $25 per barrel for four years -- a boom price compared to the previous decade. Recovering from the war, Baghdad is preparing to resume international sales in about a week's time. Shipments are expected to rise sharply over the next few months, but still well below pre-war levels. In April, OPEC ministers said they were ready to cut up to two million barrels per day (bpd) to make room for Baghdad. However, prices have remained higher than some expected, while stocks in consuming countries such as the United States have failed to recover fully from historically low levels. Data from the OPEC secretariat now shows that the world market can absorb some 1.3 million bpd above forecast demand during the third quarter to replenish stocks, an OPEC source said, asking not to be named. "That means there is more than enough room for Iraq at current quota levels," he told Reuters, predicting Iraqi supply at 1.5 million bpd in the third quarter. OPEC powers Saudi Arabia and Venezuela met with Mexico in Madrid on Friday to discuss the return of Iraq. Venezuela's Oil Minister Rafael Ramirez visits Norway on Monday. Venezuela said there was adequate oil supply to meet demand, and non-OPEC countries including Mexico, Russia and Norway were willing to coordinate output policy.