OPEC keeps oil production as is.
By James Cox, USA TODAY With oil prices near 12-week highs, OPEC ministers who were set to slash output after the war in Iraq instead left production levels unchanged at their meeting Wednesday.
OPEC President Abdullah bin Hamad al-Attiyah said the 11-nation cartel will meet July 31 to reassess the situation.
Crude prices were expected to tumble after the war on the belief that, with Iraq's oil facilities largely intact, Iraqi oil would flow quickly back to export markets. Instead, looting and sabotage have prevented Iraq from resuming exports, and global oil prices have remained stubbornly high.
In New York, the price for U.S. benchmark crude closed up 28 cents at $31.73 a barrel on Tuesday.
Economists say prices have not retreated because Iraq has been slow to revive production, and political turmoil has suppressed output in Venezuela and Nigeria.
"Two months ago, they thought, 'Oh my God, in another month we could see $15 (a barrel) oil if Iraq comes back.' It hasn't happened," says Fadel Gheit, oil analyst at Fahnestock & Co.
Monday, Iraqi oil officials appointed by the U.S. occupation authority said crude exports wouldn't resume until month's end and wouldn't reach prewar levels until the middle of 2004.
Al-Attiyah said that the July meeting would look at the impact of Iraq's return to the oil market and that OPEC would consider all options to maintain its interests.
Venezuelan oil officials insisted Tuesday that the country was pumping enough to meet its OPEC quota. But "somebody's lying," Gheit says, "because if that was the case, prices would be lower."
Prices soared near $40 to hit 12-year highs during the Iraq war. But lost supplies from Iraq, Venezuela and Nigeria have partly been offset by Saudi Arabia, Kuwait and the United Arab Emirates, which have boosted output.
Commercial stockpiles worldwide are at five-year lows. U.S. inventories are near two-decade lows.
"We haven't been able to catch up and replenish," says Tom Kloza at Oil Price Information Service. "Part of that is due to some very brisk gasoline demand, part is a hangover from a godawful winter."
Gasoline prices have come down, falling 10 out of the most recent 11 weeks, says the U.S. Energy Department. Nationally, regular unleaded is expected to average $1.46 a gallon during the summer driving season, the department predicts.
Gheit says oil prices could plunge $4 to $5 a barrel once Iraq can resume its prewar export of 2 million barrels a day. In the meantime, the Organization of Petroleum Exporting Countries is walking a fine line.
On one hand, it doesn't want to choke off a global economic recovery by keeping prices too high. On the other, it's determined to stave off a crash in prices when Iraq, Venezuela and Nigeria begin boosting their exports.
OPEC has been lobbying big non-OPEC producers Russia, Mexico and Norway to support the cartel's anticipated production cuts by holding output firm or making their own cuts.
Contributing: The Associated Press