OPEC to Keep Oil Quota, Debate Cuts Later This Year (Update1)

June 11 (<a href=quote.bloomberg.com>Bloomberg) -- The Organization of Petroleum Exporting Countries, pumping at near-record levels, agreed to leave its oil quotas in place as delays in Iraqi sales drive up prices, the group's president said.

``There is an agreement now to keep the oil production and the quotas unchanged,'' said OPEC President Abdullah bin Hamad al- Attiyah in Doha, Qatar, where the group is meeting today. The group will reconvene on July 31, an OPEC spokesman said.

Ministers from the United Arab Emirates, Kuwait, Iran and Libya earlier today said the group has no need to make changes. Cutbacks may come in the third quarter, ministers said, as Iraqi shipments rise to near prewar levels of 2.5 million barrels a day, 3 percent of the world's total.

OPEC is lobbying non-members including Norway and Mexico for support in restraining output later this year, seeking to keep prices within the cartel's target range of $22 to $28 a barrel. OPEC's price index was at $27.53 a barrel, up 22 percent in the past year. Crude oil was down 20 cents at $27.90 a barrel as of 10:06 a.m. in London on the International Petroleum Exchange.

Ministers instead of reducing quotas have called for greater compliance with the existing targets. OPEC's 10 members outside of Iraq in May pumped 26.4 million barrels a day, according to Bloomberg estimates, above the group's goal by 1 million barrels.

Iraqi exports stopped when U.S. and British forces invaded on March 20 to oust President Saddam Hussein over allegations he was amassing weapons of mass destruction. Looting since then has hampered efforts to restore production. The nation is now producing 700,000 barrels a day, which may rise to 1.5 million this month, officials have said.

`Balanced Market'

There is now almost a balanced market,'' said Abdulhasid Mahmoud Zlitni, Libya's top oil official, in Doha. Looking ahead to the arrival of Iraq oil on the market, if members do not cut supply to the level of production agreed to in Vienna, there will be 600,000 to 800,000 barrels of oversupply,'' he said.

Oil officials in Iraq have said the nation will take months to get to normal. The head of Iraq's northern oil fields said the export pipeline to Ceyhan, Turkey, may be shut for eight weeks because theft has disabled control systems. The southern manager said output will peak this month at 800,000 barrels a day, barely a third of prewar levels, until security resumes.

The situation in Iraq is a lot worse than people are being led to believe,'' said Tony Zafar, a trading manager at 5D Ltd., an oil-trading company. There is no way production will be up and running in two month's time, so OPEC doesn't need to worry about an oil glut anytime soon.''

Russia

In addition to its own reductions, OPEC is lobbying non- members Russia, Norway, Mexico and Oman for cutbacks. Norway this week has said it may consider such a move if prices drop. The nations have in the past cooperated with OPEC to restrict supplies and keep prices high.

The interests of Russia and OPEC concur in many ways,'' said Russian deputy minister of fuel and energy Alexander Voronin in Doha. But making decisions on how much oil to export, Russia, as it did before, will proceed from the needs of the Russian economy and the necessity of increasing the living standards of our population.''

Oil inventories are falling in the U.S., the world's largest energy consumer, also bolstering prices. Supplies are at 289 million barrels, according to government estimates, down 11 percent in the past year.

Oil inventories in industrialized countries are relatively tight for this time of year,'' al-Attiyah said. This may serve to support oil prices in the coming months.''

OPEC's 11 members are Saudi Arabia, Iran, Iraq, Kuwait, the United Arab Emirates, Qatar, Algeria, Nigeria, Libya, Indonesia and Venezuela.