The Dallas Morning News Last Updated: April 24, 2003

The Organization of the Petroleum Exporting Countries surprised oil traders Thursday, deciding at an emergency meeting to cut production but raise quotas to keep oil supplies plentiful.

The 11-member oil cartel, which pumps a third of the world's oil, was expected to trim some production in an effort to stem a postwar slide in oil prices.

The move should offer some relief to motorists this summer, because OPEC didn't cut production to the point that it would push prices above $30 a barrel and lead to higher gasoline prices.

"This is all extremely good long-term news," said Peyton Feltus, president of Randolph Risk Management. "If we continue to see that we're moving closer and closer to stability, pump prices will be more reminiscent of years past."

Thursday's actions could mean a gasoline price decrease of between 5 and 6 cents a gallon at the pump in the United States, according to George Gaspar, who follows the oil market for Robert W. Baird & Co.

Without the OPEC decision to cut production, gas prices might have fallen even more as additional oil came onto the world markets, he said.

In addition to the OPEC cuts, other things have an impact on pump prices, he said. For example, U.S. gasoline inventories now are about 4.6% lower than a year ago, thanks in part to disruption in the Venezuelan oil industry. He also said that pump price patterns will change next month, when the summer driving season begins in the U.S.

The OPEC decision will have the largest effect on Saudi Arabia, the world's largest oil producer, which was among key producers that had opened their spigots to prevent supply shortages from a strike in Venezuela and war with Iraq.

Some of Iraq's oil fields started pumping again this week, but exports aren't likely to resume until June. OPEC is expected to make further cuts as significant Iraqi exports return to the market.

"This is an initial step to throttle back the volumes that were being produced as a result of the conflict and as a result of the heating season," said John Gerdes, an analyst at Southwest Securities.

Though oil prices moved above $30 per barrel last week for the first time since the war started, news of higher imports sent prices down 12% this week.

Gasoline prices had been dropping steadily since the war with Iraq started but threatened to rise with higher crude oil prices as the summer driving season approached.

Many analysts expect oil prices to remain well below $30 per barrel, likely in the low to mid-20s, which could allow gasoline prices to fall further.

Crude oil closed 13 cents higher Thursday, at $26.78 per barrel, on the New York Mercantile Exchange.

OPEC members, which control three-fourths of the world's proven oil reserves, say they want to manage production to keep prices between $22 and $28 a barrel.

Avrum D. Lank of the Journal Sentinel staff contributed to this report.

springfieldnewssun.com-The Associated Press By BRUCE STANLEY AP Business Writer

VIENNA, Austria (AP)--Hoping to stabilize weakening crude prices, OPEC members agreed Thursday to cut their current oil output by 2 million barrels a day, or 7 percent.

At the same time, the Organization of Petroleum Exporting Countries took the surprising step of temporarily raising its official output target to 25.4 million barrels, up 900,000 barrels a day from its existing ceiling.

The changes take effect June 1, OPEC President Abdullah bin Hamad Al-Attiyah said.

The group, whose 11 members pump about a third of the world's oil, announced its decision at a chaotic news conference at its headquarters that left some energy analysts bewildered.

The announcement followed three hours of emergency talks that aimed at preventing a further decline in prices. Crude prices have tumbled from almost $40 a barrel for U.S. crude before the Iraq war to about $25 in recent weeks. OPEC feared more declines if it didn't rein in what it saw as an oversupply just as crude demand reached a seasonal low.

The group based its production cut largely on what it said was sluggish global demand during the second quarter. The slowdown has been exacerbated by the outbreak of severe acute respiratory syndrome, which Al-Attiyah said has dampened crude demand by 300,000 barrels a day.

OPEC plans to review its decision when it meets again June 11 in Doha, Qatar.

We feel we may need another cut in June,'' Al-Attiyah said, adding: We will watch the market very carefully. We will see how the market reacts.''

The market's initial reaction was to shave about a dollar off the price of a barrel of oil, as traders apparently concluded that OPEC was making more crude available than they had expected. June contracts of U.S. light, sweet crude fell as low as $25.61 a barrel in New York, but ended down 1 cent at $26.64 a barrel. North Sea Brent crude for June delivery settled up 4 cents at $24.30 a barrel in London.

Al-Attiyah argued that OPEC could not begin cutting production in May because member countries had already committed fixed quantities of oil to their customers.

``We cannot pull out of the market,'' he said.

Several OPEC members had boosted their production before the war, hoping to head off a supply shortage. The rapid end of the conflict has left them facing what they see as a surplus of 2 million barrels a day.

It is important to reduce oversupply,'' Venezuela's oil minister Rafael Ramirez told reporters before the hastily arranged talks began. We have to have more discipline, and it is important to take measures and remove that amount from the market.''

If not, OPEC wouldn't be able to maintain its price target of $25 a barrel, he said.

Many energy analysts had expected OPEC to agree to curb production. In the end, the group took the unusual decision of slashing its actual production--which it calculated as 27.4 million barrels a day, including Iraq--while also raising the nominal ceiling for OPEC's 10 members excluding Iraq. OPEC's current target is 24.5 million barrels a day.

The decision means Saudi Arabia, OPEC's most powerful member, would reduce its production by 1 million barrels a day, Al-Attiyah said.

OPEC representatives called Thursday's meeting to reassess the group's output levels as oil began flowing again in Iraq for the first time since the war.

OPEC is ready to welcome Iraq back as a participating member, Al-Attiyah said. Iraq hasn't taken part in the group's production agreements since April 1991, after the first Gulf War.

I hope Iraq comes back tomorrow,'' he said, adding later: We will accommodate Iraq at the right time.''

To keep control of oil production, OPEC will eventually need to reintegrate Iraq's future output into the group's overall production. This could be a divisive project that would probably require other members to reduce their own shares of OPEC's output.

<a href=www.ipsnews.net>Inter Press Service News Agency Mehru Jaffer

VIENNA, Apr 24 (IPS) - OPEC, the exclusive cartel of eleven oil-producing and exporting countries stands at the crossroads as it tries to balance supply in a world where the demand for oil seems unlimited.

Adding to the uncertainty is the future of Iraq within the organization that comprises of member nations from Africa, Asia, the Middle East and Latin America

”For the first time in its 43 year old history a decision is taken by OPEC in the absence of Iraq,” Abdullah bin Hamad Al-Attiyah, Qatar's minister of energy and industry told a roomful of reporters at Vienna's OPEC Secretariat.

He met with journalists after a day-long consultative meeting where it was decided to cut back OPEC's contribution by two million barrels a day by June first. Al-Attiyah called this a unique situation especially since little is known as to what is going on in Iraq.

There is uncertainty over who will be responsible for marketing the oil in Iraq. The Security Council has to first say goodbye to the UN resolution that allowed Iraq to exchange oil for food in the past before the United States, in control of Iraqi oil fields now, can dream of pocketing the profits.

Iraq is a founding member of OPEC but has not been contributing its quota to the cartel since 1990 after its invasion of Kuwait, a fellow member country, followed by sanctions imposed upon it in 1991.

However Dr. Amer Mohammad Rasheed Baghdad's minister of oil till January this year remained a familiar face at all OPEC meetings and an official from the Iraqi embassy in Vienna represented the country at an earlier OPEC meeting held here in March.

It was Baghdad that hosted the first meeting in 1960 which led to the birth of OPEC as a permanent intergovernmental organisation of oil producing countries. In 1965 OPEC moved its headquarters from Geneva to Vienna where oil ministers meet regularly but under tight security. The membership of Iraq within OPEC is now a question mark in capital letters.

”We wait to welcome any future minister of oil of a free and democratic Iraq to the OPEC premises as soon as possible. There is no question of discussion about the state of oil in Iraq with the Americans as it is not America that is a member of OPEC,” Al-Attiyah said.

Anxious to continue control over the world's oil production, OPEC is concerned about news trickling in from the oil fields of Iraq that crude from the country could return to the market within weeks.

Today's decision to return to OPEC's lower but original official output target of 25.4 million barrels a day from 27.4 million barrels a day follows on the heels of information that Iraq's Rumeila oil fields have started to release limited amounts of crude into storage tanks in Basra, Iraq's southern city.

OPEC's collective contribution is about 40 percent of the world's output and it sits on more than three quarters of the total crude oil reserves. The cartel now hopes that by curbing over-supply it will help to stabilise the price of crude at 24 dollars a barrel, equal to about 160 litres of oil.

Iraq has the potential of being the world's second largest supplier of crude after Saudi Arabia. It already has 112 billion barrels of crude in reserve and OPEC is nervous over the world market's expectation of more oil from Iraq.

The demand for oil is on the rise in a world that already guzzles 78 million barrels a day. In anticipation of Iraqi crude OPEC has decided to return to its original official output target.

Once United Nations sanctions against Iraq are lifted, the country is expected to start selling up to two million barrels a day within weeks. According to reports from Iraq, the immediate flow will go to feed refineries and power plants within the country before it is sold abroad.

Uncertain over how much crude the Iraqi fields will ultimately yield, OPEC fears that a glut in the supply of oil could drown markets, forcing prices to slump. OPEC would like to see prices balanced between 22 dollars to 28 dollars per barrel.

In January OPEC increased its average from 24.5 million barrels a day by 1.5 million barrels a day to make up for production failures caused by unrest in Venezuela and the war in Iraq, two member countries with most of the additional crude contributed by Saudi Arabia the world's largest owner of crude oil.

From 9.1 million barrels a day, Saudi Arabia's quota is now reduced to 8.2 million barrels a day. Ali al Naimi, Saudi Oil Minister told reporters that producers were defending crude at 25 dollars a barrel and hoped that the target would remain stable for the next decade.

”The big players in the oil market need to rally around the current price levels to have enough investment in the next ten years, to meet demand that is why we need to keep the 25 dollar target not lower, not higher,” Al Nuami said.

The minister feels that it is in the interest of all oil producing countries, non-OPEC states, the International Energy Agency and oil companies as well as consumers if prices remain around 25 dollars a barrel.

But a sluggish world economy, the spread of the SARS disease and uncertainty over Iraq is not the only frown on OPEC's brow. ”It is also elections, strikes and the quota from Nigeria,” oil specialist Valerie Marcel told IPS referring to domestic troubles faced by yet another member country. (END/2003)

By Bruce Stanley, Boston.com-Associated Press, 4/24/2003 08:18

VIENNA, Austria (AP) Pressure on OPEC to cut its crude production mounted Thursday when Venezuela's oil minister added to other cartel members' calls for action to soak up a perceived excess in global supplies.

Representatives of the Organization of Petroleum Exporting Countries gathered in Vienna for hastily arranged talks to reassess the group's output levels now that the war in Iraq is over.

Several OPEC members who boosted their production before the war to head off a possible supply shortage worry that they now are pumping too much crude just as seasonal demand is drying up. Prices have tumbled from a pre-war high of almost $40 a barrel for U.S. crude in recent weeks, and OPEC fears a further decline if it doesn't rein in production soon.

OPEC president Abdullah bin Hamad Al-Attiyah has argued that oil producers are already pumping 2 million barrels a day in excess of the world's needs. Venezuelan oil minister Rafael Ramirez appeared to agree.

''It is important to reduce oversupply,'' Ramirez told reporters. ''We have to have more discipline, and it is important to take measures and remove that amount from the market.''

If not, OPEC wouldn't be able to maintain its price target of $25 a barrel, he said.

Many energy analysts expected OPEC to agree to curb production. The question was whether OPEC would try do so by lowering its official output target or by taking the much less drastic step of reining in the amount of oil its members were pumping above their respective quotas.

On Thursday, contracts of U.S. light, sweet crude for June delivery were trading in New York at $26.85 a barrel, up 20 cents from Wednesday's close. In London, June contracts of North Sea Brent crude were trading at $24.52, up 26 cents a barrel.

Although OPEC's official output target is 24.5 million barrels a day, the group pumped an average of 26.2 million barrels in March, according to estimates compiled by investment bank J.P. Morgan.

United Arab Emirates' Oil Minister Obaid bin Saif Al-Nasseri was among those voicing support for OPEC to take steps to reduce supplies and avert a price crash.

The prospect of an eventual revival in Iraqi crude exports was a key factor in OPEC's decision to call its emergency meeting. Indeed, Iraq's eventual reintegration into the group it helped found 43 years ago colored the calculations of every oil minister arriving for Thursday's talks.

Iraq's enormous oil reserves make it a force to be reckoned with as it rises from the ashes of war to assume its rightful position as one of the world's major crude producers.

Yet Al-Attiyah, the OPEC president, insisted Iraq wasn't on the agenda, and for the first time in the cartel's history, no one even planned to represent Iraq when the delegates gathered.

All this has served to perpetuate Iraq's role as the biggest wildcard among OPEC's 11 member countries. With a new government yet to take shape in Baghdad, the speed and timing of a resumption in Iraqi oil shipments is one of the biggest unknowns for OPEC.

A sign of recovery for Iraq's lifeblood oil industry came when modest amounts of crude began flowing Wednesday from Iraq's Rumeila South oil field to a storage tank near the southern city of Basra. It was the first time since the war that oil coursed through the country's largely undamaged pipelines.

''The volumes are very limited, and they certainly don't suggest an imminent resumption of Iraq's exports,'' said Raad Alkadiri, an Iraq specialist at The Petroleum Finance Co., a Washington consultancy. All the same, he said, ''It's a start.''

Analysts and U.S. military engineers say Iraq, with 112 billion barrels of proven reserves, could resume overseas crude shipments within weeks.

OPEC pumps about a third of the world's crude. To keep control of oil production, it will eventually need to finesse the potentially explosive task of accommodating Iraq's future output, probably by having other members reduce their own production.

OPEC delegates billed their talks as consultations rather than a formal meeting a nicety that enabled OPEC to avoid holding an official session where Iraq would have been represented only by a miniature flag and an empty chair.

The lack of a recognized Iraqi government meant that no one from Baghdad would be attending. The cultural attache at the Iraqi embassy in Vienna had done so at two previous group meetings, but he turned down an invitation to participate again, an OPEC official said.

Posted on Thu, Apr. 24, 2003 BY KEN MORITSUGU twincities.com-Knight Ridder News Service

WASHINGTON — The good news is gasoline prices are not expected to rise much this summer. The bad news is they might not fall either.

A recent slide in gasoline prices might be winding down because major oil- producing countries are expected to announce production cuts today and the peak U.S. driving season is about to begin.

The Organization of Petroleum Exporting Countries is holding an emergency meeting in Vienna, Austria, to decide how much to rein in production.

The national average price for a gallon of regular unleaded dropped 15 cents in the past five weeks to $1.57, in large part because OPEC flooded the market with crude oil to offset the loss of supply from Iraq during the war. Gasoline is even cheaper in much of the South, but more expensive on the West Coast.

Now, OPEC is worried that a glut of oil might develop and cause a collapse in oil prices.

The price of crude oil fell to $26.65 a barrel Wednesday on the New York futures market, as the Energy Department reported that record oil imports last week pushed up U.S. inventories by 9 million barrels. A barrel is 42 gallons.

Just how much to cut remains a bit of a guessing game for the OPEC oil ministers. One uncertain factor is how soon Iraqi oil will return to the market. Other question marks include how quickly Nigeria and Venezuela will return to full production after political unrest that disrupted their oil operations.

Oil market analysts expect OPEC to curtail production by somewhere between 1 million and 2 million barrels a day and to revisit the issue at its next meeting on June 11. The OPEC nations are pumping more than 26 million barrels daily.

While OPEC cuts the supply of oil, U.S. demand is expected to rise as the weather warms and more people take to the roads.

Driving could be heavier than usual this year if the severe acute respiratory syndrome crisis prompts more people to take driving vacations instead of flying abroad, said Bruce Cavella, an oil industry analyst with Global Insight, an economic consulting firm in Lexington, Mass.

The Energy Department predicted earlier this month that unleaded regular would average $1.56 a gallon this summer, and an Energy Department economist said Wednesday that he sees no reason to change that. That still would be 17 cents a gallon higher than last summer's average of $1.39.

Gas prices could fall if OPEC miscalculates and the price of crude oil plummets.

Conversely, gas prices could rise if there is a serious breakdown. Because refiners made more fuel oil and less gasoline during the relatively cold winter, and because they cut back purchases of crude oil when prices were high, inventories of gasoline are lower than usual.

for this time of year, leaving the market vulnerable to a major refinery shutdown or pipeline break.

"We're not free and clear yet," Cavella said. "I think the next couple of months will still be dicey for gasoline prices."