Oil hits fresh highs ahead of OPEC meeting

June 9, 2003, 4:14PM Reuters News Service

NEW YORK - Oil prices hit fresh 12-week highs today as members of the Organization of the Petroleum Exporting Countries cartel gathered for a Wednesday meeting against a backdrop of tight global supply.

U.S. crude oil in New rose 31 cents to $31.59 a barrel, hitting the highest price in 11 weeks after rising 20 percent in barely a month. Brent crude in London rose 7 cents to $27.85 a barrel.

OPEC ministers meeting in the small Middle East emirate of Qatar will debate whether they need to cut production to accommodate the expected resumption of Iraq's oil exports this month.

With prices nearly 30 percent higher than the same time last year and Iraq's exports expected to stay below pre-war limits for up to a year, some OPEC ministers have said there seems to be no need for the group to rein in supply.

OPEC, which controls around half the world's crude exports, aims to keep prices in a $22-28 a barrel range for its basket of crude oils. The basket was last valued at $26.77.

"There is no urgent need for the organization to modify its output," said Frederic Lasserre of SG Securities in a report.

"Iraq is still not in a position to harm the balance of supply and demand. Inventories are rising in line with the season but in absolute terms remain very low," Lasserre added.

After falling heavily from 12-year highs near $40 when Middle East oil facilities escaped feared damage from the U.S.-led invasion of Iraq, oil prices have now risen back to the levels that can further undermine already weak economic growth.

OPEC will use this week's meeting to press independent exporters such as Russia, Norway and Mexico to back any supply cuts needed later this year, OPEC President Abdullah al-Attiyah of Qatar said.

Iraq will this month sell its first crude since the U.S.-led invasion in mid-March, tendering 10 million barrels of stored crude oil this month, allowing it to deliver an average of about 750,000 bpd during the second half of June.

Sabotage at oil facilities since the war will keep exports down to one million bpd in July, Iraq's de facto oil minister Thamir Ghadhban said on Monday. Before the war, Iraq was producing about 2.5 million bpd and exporting two million bpd.

U.S. fuel inventories have failed to rebuild after supply disruptions from a strike in Venezuela and ethnic strife in Nigeria drew down supplies earlier this year.

U.S. crude stocks remain in an 11 percent deficit versus last year, while gasoline is down five percent. The next U.S. government supply data will be released on Wednesday.

U.S. average retail gasoline prices fell over the last three weeks, but did so at a slower rate than previously reported as crude oil prices began to rise, according to the Lundberg survey of about 8,000 gas stations.

"In the past three weeks, gasoline price declines are much slower and appear to be ceasing altogether," said Trilby Lundberg, editor of the survey.

The national average for self-serve regular unleaded gasoline fell 1.8 cents to $1.51 a gallon -- more than 10 cents above last year in the period between May 16 and June 6.