Opec keeps market guessing

News24.com 10/06/2003 12:32  - (SA)  

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Doha - Opec nations have injected a fresh dose of suspense to a tense oil market ahead of meeting on Wednesday, hinting that an output cut to accommodate Iraq's upcoming production was on the cards.

"We will discuss all the options," said Opec president Abdullah al-Attiyah, whose country, Qatar, is due to host the extraordinary meeting of the Organisation of Petroleum Exporting Countries.

Attiyah, who is also Qatar's energy minister, said the market could face a production surplus of about 1.4 million barrels per day (bpd) if the same level of production is kept for the third quarter.

But he added that "this does not mean" that the organisation will lower its current official output ceiling of 25.4 million bpd.

His statement nevertheless cast doubts on earlier ones from Opec officials that the cartel was to roll over the ceiling because prices were close to the upper limit of the US$22-$28 band sought by the cartel.

Venezuela's Energy Minister Rafael Ramirez seemed on Monday to advocate a rollover, telling a press conference in Madrid that the market was "sufficiently supplied".

Ramirez added that another Opec meeting would "probably" take place over the summer, after Iraq's exports resume, ahead of the next regularly scheduled session of the cartel in September.

The Venezuelan minister had conferred on Friday in Madrid with counterparts from Opec kingpin Saudi Arabia and non-Opec Mexico, which produced a statement that the current oil market was balanced, "with supplies adequate to meet present and future world demand for oil".

United Arab Emirates (UAE) Oil Minister Obeid bin Saif al-Nasseri pointed out on Monday that the removal of the surplus could be achieved by tightening the discipline of the cartel's members in respecting their production quotas, rather than lowering the quotas.

"It would be more useful to remedy the current (surplus in) production before deciding to lower the official ceiling" he told the official WAM news agency in the UAE capital Abu Dhabi.

"It would be difficult to give a precise figure of the surplus, but output exceeds the Opec ceiling by some 1.5 million bpd," Nasseri said.

Algeria's energy minister Chakib Khelil also hinted that a cut could be needed despite the current strong prices.

"I see the inventories are already high, there is a surplus of production, and we don't know what Iraq is going to do - when it is going to come in" to production, he told reporters.

"There is a big uncertainty and that is why the prices are high. They are not high because of the fundamentals of the market."

Iraq's exports to resume

In Baghdad, the US-appointed acting oil ministry chief Thamir Ghadhban said on Monday oil exports will resume in the third week of June, but he did not expect production to return to pre-war levels for at least a year.

He has previously put pre-war production at three million bpd, although most Western analysts estimate it at closer to 2.5 million.

Khelil said non-Opec oil exporting nations should also tighten their taps should the cartel decide to do so.

"They (non-Opec) are going to be present" at the meeting "and they are going to have to decide whether to join to stabilise the prices", he said.

Venezuelan vice-minister for oil Luis Vierma said in Madrid that non-Opec Norway and Russia had expressed "in off-the-record conversations their solidarity" with whatever is decided by Opec.

According to officials from the Opec secretariat, five non-Opec exporters will attend the meeting as observers: Russia, Mexico, Angola, Oman and Syria.

Ten of the 11-strong cartel will attend the meeting - Saudi Arabia, Iran, Venezuela, UAE, Nigeria, Kuwait, Libya, Indonesia, Algeria and Qatar. The seat of Iraq, where Opec was born 43 years go, will be vacant.

The US-British coalition ruling post-war Iraq has said it would be up to a future "representative" Iraqi government to decide whether the country remains inside the organisation.

"We will have to work hard to keep Iraq with us," said Attiyah, pointing out that the withdrawal of this nation would deprive Opec of control over 112 billion barrels of proven reserves, the second largest in the world after Saudi Arabia.