OPEC to Keep Oil Quota, Debate Cuts Later This Year (Update3)
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.
There is no shortage of oil,'' said OPEC President Abdullah bin Hamad al-Attiyah in Doha, Qatar, where the group met today and agreed to maintain a sales target of 25.4 million barrels a day. I don't think the price will jump. We are watching the market very carefully.''
The group will reconvene July 31, and members are ``committed'' to reduce supplies this month under their agreement reached in April, the president said. OPEC is concerned that a return of Iraqi oil production after the war will flood the market, causing prices to drop.
OPEC is lobbying non-members including Norway and Mexico for support in lowering 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 $27.51 a barrel yesterday, up 22 percent in the past year. Crude oil was down 20 cents at $27.90 a barrel as of 2:31 p.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.
Iraq
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.
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.
If you look at the history of the last two months, expected Iraqi export levels have been continuously revised down and pushed out,'' said Pieter Bruinstroop, who manages resource-company investments for APS Asset Management Ltd. in Singapore. All that OPEC can do, like it has done, is say, `OK, when production gets to about 2.5 million barrels, we will cut.'''
Iraq, a founding member of OPEC in 1960, had no representatives at the meeting. The OPEC president said he's waiting for an internationally recognized government in Iraq to designate an oil minister to attend OPEC meetings.
Russia
In addition to its own reductions, OPEC wants cutbacks from non-members Russia, Norway, Mexico and Oman. 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.