Posted on Thu, Apr. 24, 2003 By Ken Moritsugu The Beacon Journal-Knight Ridder Newspapers

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 Thursday 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 a gallon, 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 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.

By <a href=www.newsday.com>newsday.com-The Associated Press April 24, 2003, 12:33 PM EDT

VIENNA, Austria -- OPEC members agreed to cut their current oil output by 2 million barrels a day, or 7 percent, in a move aimed at preventing a further decline in prices, the cartel announced Thursday.

At the same time, the Organization of Petroleum Exporting Countries temporarily raised its official output target to 25.4 million barrels, up 900,000 barrels a day from its existing ceiling. The new quota would take effect June 1, OPEC President Abdullah bin Hamad Al-Attiyah told a news conference.

The delegates announced their decision after emergency talks in Vienna. Crude prices have tumbled in recent weeks, and OPEC feared a further decline if it didn’t rein in what it saw as an oversupply juist as crude demand reached a seasonal low.

The group based its decision largely on what it said was sluggish global demand exacerbated by the outbreak of severe acute respiratory syndrome, which Al-Attiyah said has dampened 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.

OPEC also was ready to welcome Iraq back as a participating member, he added.

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

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

“It is important to reduce oversupply,” Venezuelan 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, whose 11 members pump a third of the world’s crude output, wouldn’t be able to maintain its price target of $25 a barrel, he 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.

Many energy analysts had 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.

In the end, it 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.

In the days leading up to hostilities in Iraq, U.S. crude prices peaked at almost $40 a barrel. On Thursday, contracts of U.S. light, sweet crude for June delivery were trading in New York at $26.05 a barrel, down 60 cents from Wednesday’s close. In London, June contracts of North Sea Brent crude were trading at $23.62, off 6 cents a barrel.

<a href=www.voanews.com>VOA News 24 Apr 2003, 04:43 UTC

OPEC oil ministers are to meet in Vienna Thursday to discuss ways to keep oil prices within the group's desired range. The 11-nation cartel's announced aim is to stabilize prices at around $25 per barrel.

Analysts say the cartel is considering a cut in production to 24.5 million barrels a day.

Opec ministers decided in January to produce about two-million barrels more than their agreed quotas to keep prices down during a strike in Venezuela and the threat of war in Iraq. But prices have stabilized since the fall of Baghdad and OPEC is concerned about keeping them in the middle of its $22-to-$28 a barrel target range.

Another problem facing OPEC is how to reintegrate Iraq without destabilizing the market. It is unclear what role Iraq will take in the cartel. Iraq, an OPEC founding member, has been excluded from the cartel's quota export system the past 11 years because of U.N. imposed sanctions.

The OPEC meeting comes as U.S. military officials said Wednesday that plans to restart pumping in Iraq's southern oil fields was ahead of schedule.

<a href=news.ft.com>Financial Times By Carola Hoyos Published: April 24 2003 5:00 | Last Updated: April 24 2003 5:00

Today's meeting of Opec ministers could be the last for the group's most important participant. Ali Naimi, Saudi Arabia's oil minister and the architect of the Organisation of Petroleum Exporting Countries price stabilisation policy, acknowledged yesterday that he might lose his position when the kingdom reshuffles its cabinet early next month.

"Nobody lives for ever," said Mr Naimi. "I'll find out at the same time as everybody else."

Mr Naimi, 67, took up his post in 1995, becoming only the third Saudi oil minister in 41 years. Most recently he helped patch up his country's strained relations with Washington when he quickly increased the kingdom's oil output ahead of the war with Iraq and warded off a rise in prices.

He has shepherded Opec through arguably its most successful period over the past three years, maintaining oil prices in the $20 a barrel range, well above market level, but not so high as to trigger a significant drop in demand because of recession or the growth of alternative suppliers. But the success came after the bitter lesson of 1997, when Mr Naimi pushed for an increase in Saudi Arabia's quota, misjudging world demand and pushing prices to below $10 a barrel.

Any successor would inherit a challenging job, taking over as Saudi Arabia faced the return of Iraq to the global oil market and the eventual task of relinquishing some of its market share to allow Baghdad to increase its exports and rejoin the Opec quota system.

Opec and Saudi Arabia in particular will also have to answer calls from members, such as Nigeria, Algeria and Venezuela, for a larger portion of the pie.

Another challenge will be Saudi Arabia's stalled negotiations over the $25bn gas initiative, which would allow international oil companies led by Royal Dutch/Shell and ExxonMobil a foothold in Iraq's gas industry.

Mr Naimi - whose career from office boy to oil minister has spanned 55 years, during which Saudi Arabia's oil sector has gone from one dominated by the "Seven Sisters" international oil companies to one run by the state without the help of outsiders - has driven a hard bargain since the deal was signed in 2001.

While international oil company executives hope for a more accommodating negotiation partner, Saudi oil ministry officials less health conscious than Mr Naimi are likely to keep their fingers crossed for a boss not prone to taking early morning jogs and one willing to overturn Mr Naimi's no-smoking policy.

By ERIC PFANNER <a href=www.nytimes.com>NYTimes.com-International Herald Tribune

VIENNA, April 23 — Amid fears of a postwar oil glut, members of the Organization of the Petroleum Exporting Countries prepared today to cut output significantly in an effort to bolster prices ahead of the eventual resumption of Iraqi exports.

The swift execution of the war in Iraq has OPEC worried about a collapse in prices, even though Iraq's oil industry remains in disarray. While Abdullah al-Attiyah, the OPEC president, said he hoped that Iraq would eventually return to "play a very important role" in the organization, he added that the country would not be discussed, or represented, at OPEC's meeting on Thursday. Advertisement

Instead, analysts said, the 10 other members of OPEC will probably agree to cut production by as much as 2 million barrels a day, though they are unlikely to cut their official production ceiling of 24.5 million barrels. That limit, representing about a third of the world's oil consumption, was breached over the last few months as OPEC members, led by Saudi Arabia, moved to prevent a spike in prices during the war.

"We will discuss all options," said Mr. Attiyah, who is also Qatar's oil minister, as he arrived at the Intercontinental Hotel in Vienna. "Personally, I believe there is a two million surplus in the markets."

Reflecting a declared desire to manage the markets and keep prices stable, OPEC agreed in January to raise its production quota by 7 percent as war loomed and political strife in Venezuela, normally the group's third-largest producer, curtailed its output. But OPEC members actually pumped about 1.7 million barrels a day more than the official limit in March, according to PetroLogistics, a consulting firm in Geneva, and prices have eased after climbing in light of the war.

"OPEC knows it has been through an exceptional period," said Raad Alkadiri, a director at PFC Energy, a Washington consulting firm. "Now that the war is over, they realize they have to get back to the quotas."

On Wednesday, after a report showing a sharp rise in United States stockpiles, crude oil prices fell sharply in trading in New York, down $1.34, to $26.65 a barrel. OPEC's stated goal is to keep the price of a basket of crudes at $22 to $28 a barrel, and it is now in those bounds.

But the uncertain course of the global economy has made it particularly difficult to predict consumption totals. Adding to the uncertainty, Iraq is expected to step up production as wartime damage to production sites is repaired and Western oil companies help tap what experts say are the world's second-largest oil reserves, exceeded only by Saudi Arabia's.

Though some oil started flowing again today from Iraq's southern oil fields, that is for domestic consumption, and any significant resumption of exports is weeks or months away, analysts say.

A variety of political issues must be addressed. United Nations sanctions, which have restricted Iraqi exports since the first Persian Gulf war, in 1991, remain in place for now. And it is still unclear how Iraq's oil industry will be organized, or even who owns the oil fields, with no effective transitional government yet in place.

While Iraq has remained one of OPEC's 11 members since its invasion of Kuwait 13 years ago, it has been outside the group's quota system, as its exports were monitored under the United Nations oil-for-food program.

"We don't have a government today in Iraq, so we don't have any representative," Mr. Attiyah said.

OPEC's program for the meeting, prepared during the war, still lists Amir Muhammad Rashid, oil minister in Saddam Hussein's administration, as Iraq's official representative to the cartel. But he is also included in the deck of playing cards depicting 55 members of the regime sought by the United States, and his whereabouts is unknown.

Over the weekend, a former Iraqi general, Jawdat al-Obeidi, said he would represent Iraq at the meeting, but analysts said no gate-crashers were likely to arrive in Vienna.

"Whoever would have been here, it wouldn't have changed a thing," said Vera de Ladoucette, a senior director at Cambridge Energy Research Associates.

Indeed, OPEC ministers arriving in Vienna sought to portray the discussion of Iraq as a sideshow. For now, they emphasized, the group's focus was on oil prices, not politics.

"This meeting is to make sure we keep the market where it is, to make sure prices stay in the band, preferably right in the middle," the Saudi oil minister, Ali al-Naimi, told reporters. "OPEC should be given a big credit for putting as much crude as we have done into the market."

By pumping at full tilt during the war, Saudi Arabia sought to portray itself as the responsible citizen of the oil community, analysts say, regardless of the eventual effect of the conflict on the market.

For that reason, these analysts said, Saudi Arabia would probably try to abide by any new production limits for now, even though OPEC members have frequently cheated on quotas, and doing so, in the case of Saudi Arabia, has provided a recent windfall.

While Mr. Attiyah said he hoped Iraq would remain an OPEC member, some advisers in Washington have suggested that the group's leverage over oil prices could be weakened if a new, pro-American government in Iraq steered a course independent of OPEC. Iraq, together with Russia, where output is rising, could then form an effective counterweight to the organization.

But analysts say it could take years just to get Iraqi production back to where it stood before the 1991 war, when the nation pumped more than three million barrels a day, without even tapping the potential of its huge reserves.

"It's going to take a long time to get Iraq up to speed," Mr. Alkadiri said. "In the short term, it will be sort of a marginal issue for OPEC."