Oil Steady as OPEC Signals No Supply Cuts

Tue June 10, 2003 01:16 PM ET NEW YORK (<a href=reuters.com>Reuters) - Oil prices held firm near 12-week highs on Tuesday, a day ahead of an OPEC producer cartel meeting that is expected to postpone fresh supply cuts.

In New York, U.S. light crude was unchanged at $31.45, after hitting $31.85 on Monday, the highest price since March and up nearly 30 percent from a year ago. In London, benchmark Brent crude oil was steady at $27.85.

OPEC ministers meeting in the Middle East emirate of Qatar on Wednesday are widely expected to leave production limits unchanged as delays in the resumption of Iraq's oil exports have kept global supply tight.

Kuwaiti Oil Minister Sheik Ahmad al-Fahd al-Sabah said on Tuesday he wanted OPEC to keep its current 25.4 million barrels per day (bpd) ceiling in place until it meets again in late September.

"From now to September, Iraq will still have a lot (to do) to reach the previous level of production ... we still have time to continue with our ceiling," the minister said.

After falling steadily from 12-year highs near $40 after Middle East oil facilities escaped the U.S.-led invasion of Iraq without much damage, prices have rebounded to levels over $30 per barrel, which can further undermine already weak economic growth.

The Organization of the Petroleum Exporting Countries, which controls around half the world's crude exports, aims to keep prices in a range of $22 to $28 a barrel for its basket of crude oils. The basket was last valued at $27.53.

"High crude oil prices make an imminent cut to OPEC quota levels unlikely at its meeting on Wednesday," said Barclays Capital Research in London in their daily report.

"Instead the group is likely to flag up further meetings in July/August in order to monitor and accommodate Iraqi output."

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

Looting and sabotage at Iraqi oil facilities since the war will keep exports down to one million bpd in July, Iraq's de facto oil minister Thamir Ghadhban has said. Before the war, Iraq was producing about 2.5 million bpd and exporting 2.0 million bpd.

OPEC was also expected to press independent exporters such as Russia, Norway and Mexico to back any supply cuts needed later, OPEC President Abdullah al-Attiyah al-Attiyah said.

More indications on global oil supply and demand will be released on Wednesday when the U.S. government publishes its weekly petroleum inventory data, a key indicator in oil markets.

The figures are expected to show a small crude stock increase in the week ending last Friday, a Reuters poll of oil market analysts showed.

U.S. fuel inventories have failed to rebuild after supply disruptions from a strike in Venezuela and ethnic strife in Nigeria drew down stocks. U.S. crude stocks are 11 percent below last year, while gasoline is down 5 percent.