OPEC maintains production ceiling

DOHA - AFP - OPEC announced on Wednesday it will maintain its current production ceiling at least until July 31 when it meets in Vienna to discuss Iraq's return to the market, but urged members to comply strictly to quotas.

"We agreed in April that the ceiling is 25.4 million barrels per day (bpd) from June 1," OPEC President Abdullah bin Hamad al-Attiyah told reporters at the end of an extraordinary meeting of the cartel in Qatar.

"Today we reconfirmed this agreement. We hope there will be no overproduction (above quotas) during this period" - which is effective until July 31.

Attiyah added that the 11-member oil cartel would do "whatever it can" for war-torn Iraq, adding it was difficult to predict when Baghdad would overcome its technical problems and resume exports.

"We hope we can see a government in Iraq, an oil minister. Until then, we will continue discussing with Iraqi oil officials how we can collaborate."

Attiyah said the Organisation of Petroleum Exporting Countries would do its "best to accommodate Iraq smoothly," treating it as a "unique" case in order to keep it within the cartel which was born in Baghdad 43 years ago.

The US-British coalition ruling Iraq has said it would be up to the next Iraqi government to decide on remaining in the cartel also made up by Algeria, Indonesia, Iran, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.

In a statement released at the end of the meeting, OPEC said stability has been "maintained in the market following the decision taken by the (OPEC) conference in April 2003 to reduce actual production to 25.4 million bpd, with prices remaining within agreed levels".

"Despite the fact that the market remains well-supplied, prices displayed an upward trend recently due to the slower-than-anticipated recovery in Iraqi production, coupled with unusually low stock levels," it said.

"However, with low stock levels anticipated to be replenished during the third quarter, the conference decided to maintain currently agreed production levels, with strict compliance, and emphasised that continued vigilance in monitoring market developments is imperative over the coming period."

OPEC said it "welcomed the return of Iraq to the oil market" and looks forward to the country's resumption of its role in the organisation.

"The conference again made its standing call on other oil producers/exporters to continue to cooperate with OPEC in its endeavours to maintain market stability in the interests of all concerned."

Attiyah said the cartel will meet in Vienna on July 31 even if Iraq does not resume exports, in order to "assess the market".

He refused to speculate on the volume that could be eventually slashed by OPEC on July 31 should Iraq resume exports, but hinted that non-OPEC exporters would have to join in any potential cut.

"Co-operation with them (non-OPEC) is important," he said.

Non-OPEC states Angola, Mexico, Oman, Russia and Syria all took part in the Doha meeting as observers, underlining their commitment to co-operate with OPEC.

OPEC ministers have said that the cartel was currently producing in excess of one million bpd above the cartel's ceiling.

The OPEC president said the conference in Doha was initially a "meeting to cut" production to accommodate the upcoming Iraqi exports.

But the oil ministers decided to maintain the ceiling because "it is difficult to predict when Iraq will return to the market," he added.

According to OPEC's estimates, Iraq's production should reach 2 million bpd by the end of the year, about 700,000 bpd below pre-war level. This would leave Iraq with 1.5 million bpd of exports only.

Oil prices were little moved shortly after OPEC's announcement, remaining slightly lower than the previous day's close.

In London, the price of benchmark Brent North Sea crude oil for July delivery was down 19 cents to 27.93 dollars per barrel.

New York's light sweet crude July contract was 11 cents lower at 31.62 dollars per barrel in out-of-hours electronic trading.

"The market had so much anticipated this decision to keep quotas unchanged, that is why oil prices have not moved sharply," said Prudential Bache analyst Christopher Bellew.

OPEC had previously been tipped to cut quotas to shore up prices, but these have stayed strong in recent weeks, buoyed by low stocks in the United States.

AFP