URL Daily Trust (Abuja) April 22, 2003 Posted to the web April 22, 2003

OPEC confirmed Monday that it will hold an emergency meeting April 24 in Vienna to discuss cutting supplies in response to a sharp drop in world oil prices.

Despite a halt in Iraqi exports due to the U.S.-led war on Baghdad, prices have slumped by 30 percent in a month on a rising tide of exports from U.S. ally Saudi Arabia and other cartel members. Check out allAfrica's debate on the election in Nigeria. Click here.

"It's definitely the 24th," an OPEC spokesman said, clearing up uncertainty over possible dates for the meeting.

Algerian Oil Minister Chakib Khelil said Monday that OPEC could stop prices falling further simply by improving compliance with its agreed ceiling of 24.5 million barrels per day (bpd), as the cartel is now pumping some two million bpd above that.

Other members could push for a cut in formal quota limits.

The Arab-dominated cartel will also discuss the return of Iraqi exports after the war, although this is unlikely to affect quotas yet.

OPEC President Abdullah al-Attiyah said last week that oversupply on world markets already topped two million bpd, and could reach four million with the return of Iraq in the months ahead.

Countering this view, Algeria's Khelil said any decision by OPEC now should take into account an expected demand rebound in the summer which could see prices rise again.

Commercial oil stocks worldwide are well below normal levels due to a series of supply interruptions from Venezuela, Nigeria and Iraq, although they have shown some signs of recovery in recent weeks.

Despite the sharp fall in prices, OPEC's reference price is now hovering around OPEC's target level of $25 per barrel, having topped $33 last month.

Saudi Arabia stepped in to cover for the Iraqi stoppage, and now accounts for three-quarters of OPEC's output above quota. Its view will be crucial.

Oil industry think-tank, the Center for Global Energy Studies, said Saudi Arabia could even seek to retain most of its recent output surge by negotiating cuts on the basis of current output, instead of quotas.

This would provoke a storm of protest from other members, who are all keen to protect their market share.

When Iraqi sales do resume, analysts believe they will rise gradually and take several months to regain their pre-war level of 2.5 million bpd.

OPEC will probably give Baghdad freedom to pump at will until it reaches its historical quota level above three million bpd, which Iraqi experts expect to take several years.

Before Iraq's invasion of Kuwait in 1990, Baghdad had the same quota level as Iran at 3.1 million bpd. Iran's quota has since risen to 3.6 million.

U.S.-backed Iraqi exiles formulating postwar oil policy for Iraq think it will take three or four years to regain output capacity of 3.5 million bpd, according to briefing papers obtained by Reuters.

April 22, 2003 By Sapa-AFP

Vienna - Opec, faced with falling oil prices in the wake of the Iraq war, is to call on its members to respect production quotas, an Opec official said on Tuesday.

The official said ministers from Opec's 11 member states would call at a meeting Thursday in Vienna for the cartel to hold to its current quota of 24.5 million barrels per day (bpd).

But analysts in Singapore said deciding how output should be reduced, and by whom, could prove difficult.

In London, oil prices held steady in early trading Tuesday. Reference Brent North Sea crude for June delivery fell seven cents to $25.78 a barrel in early deals.

New York's benchmark light sweet crude contract for May slipped 20 cents to $30.63 a barrel during out-of-hours electronic trading.

Traders said that fluctuations in the US price were largely caused by technical factors associated with the expiry of the May contract on Tuesday.

"The oil market is waiting to see what happens at the Opec meeting later this week," said analyst Andrew Whittock at Williams de Broe.

It remained uncertain what the cartel might decide on, said GNI trader Paul Goodhew.

"People are kind of expecting a cut of production of around one (million) to 1.5 million barrels per day, but what Opec actually gives us remains to be seen," he said.

Over the weekend, the president of the Organization of Oil Producing Countries, Abdullah bin Hamad al-Attiyah, said that the group must act to curb a surplus of two million barrels a day on the market since the Iraq war.

However, a dealer in Singapore with a regional trading firm, commented: "They (Opec) should not complain too much since oil prices have held at relatively high levels ."

Among the factors clouding the group's deliberations will be the continuing uncertainty over when Iraqi oil exports are most likely to resume.

Opec had announced in January an output increase, raising its combined output ceiling by 6.5 percent to 24.5 million bpd, to curb a surge in prices triggered by a strike in Venezuela and the threat of war in Iraq.

Since then, Opec members have produced over the quota as the price of oil soared up to $40 per barrel.

There is concern now that oil prices could collapse due to oversupply.

A return to the quota "is the most likely scenario" to seek to adjust prices, the Opec official said.

Opec seeks to have oil prices within a band of $22-$28 per barrel.

With Iraq's oil exports expected to begin flowing again following the US-led war to unseat the regime of Saddam Hussein, Opec has been anxious to avoid a plunge in global prices through oversupply.

However, analysts said there were fresh concerns over supplies from Nigeria, where violence has flared following a disputed presidential election.

Nigerian soldiers shot dead eight opposition supporters after coming under fire during an election day protest at the weekend, a police spokesman told AFP on Tuesday.

Last month around a third of all Nigeria's oil exports were halted due to civil and political unrest. - Sapa-AFP

The Globe and Mail By PATRICK BRETHOUR With files from Bloomberg Tuesday, April 22, 2003 - Page B1

Closing Markets - Thursday, Apr. 24

S&P/TSX -55.32 6561.55 DJIA -75.62 8440.04 S&P500 -7.59 911.43 Nasdaq -8.93 1457.23 Venture 1.01 1044.95 DJUK -2.56 158.57 Nikkei 61.19 7854.57 HSeng -77.49 8442.11 DJ Net -.76 46.17 Gold (NY) +3.20 335.10 Oil (NY) -0.01 26.64 CRB Index -0.16 233.76 30 yr Can. -0.04 5.50 30 yr U.S. -0.05 4.83 CDN$ buys US$ -0.0033 0.6859 Yen -0.7400 82.1900 Euro -0.0082 0.6212 US$ buys CDN$ +0.0069 1.4579 Yen -0.5100 119.8200 Euro -0.0076 0.9057

CALGARY -- The Organization of Petroleum Exporting Countries appears set to cut back production -- rather than formal quotas -- at an emergency session Thursday to avoid a glut of oil in the latter half of the year.

Those expectations briefly pushed crude prices above $31 (U.S.) a barrel yesterday.

OPEC essentially abandoned its quota system last month, just before the launch of the U.S.-led war on Iraq, aiming to make up for the loss of more than two million barrels a day in Iraqi exports.

The result was production far beyond the formal quota of 24.5 million b/d established in March for the 10 members of OPEC excluding Iraq. According to estimates by the International Energy Agency, OPEC produced 25.88 million b/d in March, even though output from Venezuela and Nigeria was constricted.

Oil prices have remained buoyant, even with the overproduction., largely because of concerns about how long it will take for Iraq to resume production.

So far, predictions of a sharp decline in postwar oil prices have not materialized.

Crude oil for May delivery rose 32 cents to $30.87 a barrel yesterday on the New York Mercantile Exchange, the highest closing level this month for the benchmark contract. In early trading, it touched $31.08 a barrel.

But with global oil production at its highest level on record, OPEC clearly needs to trim its output for fear of seeing crude inventories rise too quickly, one analyst said. "OPEC is pumping an awful lot of oil," said Steve Thornber of Threadneedle Asset Management in London.

However, analysts said OPEC is unlikely to reduce its production quotas, and will instead focus its attention on bringing actual output into line with those formal targets.

Economic and political pressures will both drive OPEC in that direction, analysts said.

The cartel may paradoxically give a stronger upward push to oil prices -- currently just above its preferred range of $24 to $30 a barrel -- by not cutting quotas, said Kyle Cooper, a Houston-based analyst with Smith Barney.

A quota cut would send the message to the market that OPEC is not committed to reducing output, since a reduction from actual production to a lower quota would be unrealistic, Mr. Cooper said. Conversely, a hint of an intent to lower output to current quota levels will signal that OPEC is serious about reducing surplus production.

Tim Evans, a senior energy analyst at IFR Pegasus in New York, agreed that a reduction in OPEC quotas would not translate into additional cuts in production. Saudi Arabia is responsible for much of the overproduction, and it will take as long as eight weeks to reduce its output to even its current quota, Mr. Evans noted.

Any further reduction would be unlikely to take effect until after the cartel's next meeting in early June, he said. "It would be a cosmetic adjustment."

Global politics will also influence the cartel, Mr. Evans said. Saudi Arabia, particularly, will not want to be seen as taking advantage of the United States in the wake of the war on Iraq by cutting quotas to boost oil prices even more, he said. In contrast, a vague statement of intent to cut back excess production will not be seen as a flagrant insult, he said.

On the other side of the equation, OPEC will need to consider the long-term effect of high prices on its control of the global oil market. At higher prices, non-OPEC producers with higher production costs, such as Russia and Norway, are able to increase their output, leaving the cartel with a smaller share of a larger market.

April 22, 2003 By <a href=www.busrep.co.za>BusinessReport.com-Sapa-AP

London - By boosting production ahead of the war in Iraq, Opec succeeded in allaying concerns about a possible oil shortage once the shooting began.

Yet instead of celebrating its achievement, the producers' cartel fears the world is now awash in crude and at risk of a ruinous price crash.

It has called an emergency meeting for Thursday to assess post-war conditions in the oil market, with a view to slashing output to bolster sagging prices.

Opec president Abdullah bin Hamad Al Attiyah has said he believed the world was oversupplied by 2 million barrels a day at a time when seasonal demand normally slips to its lowest level of the year.

But energy analysts warn that crude oil inventories in major importing countries are still alarmingly low. They argue that Opec must be careful not to curb production so much that refiners face low stocks of oil as they head into the northern summer, the peak season for petrol consumption.

"This whole idea that there is a tidal wave of overproduction that's going to sink prices is just wrong," said Adam Sieminski, an oil price strategist at Deutsche Bank in London.

"Inventories are extremely low and Iraq is not producing, so there is no overproduction."

Opec has timed its meeting in Vienna to assess market conditions in the immediate aftermath of the war. This will not be easy, and some analysts argue that such a meeting is premature.

No one knows when Iraq will be able to resume its crude shipments. Nigeria and Venezuela, meanwhile, are still clawing their way back to production levels they enjoyed before social unrest and a national strike, respectively, dented their output.

Yet Opec, which pumps about one-third of the world's oil, is eager to show it is in control of, or at least closely monitoring, a tempestuous market.

Opec's members agreed in January to a production target of 24.5 million barrels a day . They soon overreached their quotas to profit from the high prices preceding the war as much as to reassure markets that supplies would be plentiful in spite of any hostilities.

Opec earned plaudits from the US and other importers for its proactive, and unofficial, rise in output. By some estimates, Opec's 10 members, excluding Iraq, pumped an average of 26.2 million barrels a day last month - 7 percent above their quotas.

But oil prices tumbled as the conflict unfolded. By the time the fighting was over, futures contracts of US light sweet crude had fallen more than one-third, from a high for the year of $39.99 a barrel reached on February 27.

Opec worries that prices may have further to fall.

"I do not think there is any necessity for Opec to carry on with excess production," Iranian oil minister Bijan Namdar Zangeneh said last week in Tehran.

"We should consider a cutback in production to balance supply and demand, especially in the second quarter." Many analysts accept that a production cut may be a foregone conclusion.

Kevin Norrish, the head of commodities research at Barclays Capital in London, said Opec would need to rein in output by 1 million to 1.5 million barrels a day to keep prices from sliding below $22 a barrel - the bottom end of its targeted price range.

Leo Drollas, the chief economist of the London-based Centre for Global Energy Studies, suggested a cut of 650 000 barrels a day would stabilise prices.

But crude inventories are unusually low for this time of year, and a deep cut by Opec would make it harder for importers to build them to comfortable levels.

Claude Mandil, the head of the International Energy Agency - a watchdog agency for the world's leading importers - warned last week that a cut in output would not actually take effect until demand started to rise in the third quarter. - Sapa-AP

IrishExaminer.com 22/04/03 By Alex Lawler

OPEC, supplier of a third of the world’s oil, is planning to cut production from its highest level in 18 months to prevent a price slump as demand slows and Iraqi sales near a return to the market.

Saudi Arabia led OPEC’s output higher this year to avert shortages caused by outages in Venezuela and Nigeria and the war-related halt to Iraqi exports. Production is some two million barrels a day more than demand, OPEC ministers said last week.

Crude oil in New York has slid 24% from a 12-year high of $39.99 a barrel in February while the coalition deposed Saddam Hussein in Iraq and seized the country’s oil fields. Faced with a seasonal drop in use, the Organisation of Petroleum Exporting Countries meets Thursday to discuss how to prevent a glut.

“OPEC is pumping an awful lot of oil,” said Steve Thornber, who manages £400 million pounds ($628 million) at Threadneedle Asset Management in London, including BP Plc shares. “If OPEC doesn’t take action or it’s seen as not aggressive enough, you will see a sharp drop in the oil price.”

The group sets quotas to keep prices between $22 and $28 a barrel and some members may be reluctant to lower production because of a need to raise government revenue. It had planned to next meet on June 11 in Doha, Qatar, but called this week’s gathering after prices slid.

In March, OPEC pumped 1.57 million barrels a day more than the target of 24.5 million, almost enough to supply Spain, according to Bloomberg estimates. Of the total, Saudi Arabia pumped 9.2 million barrels a day.

“Some OPEC members will feel Saudi Arabia should take a greater proportion of any cut,” said Paul Spedding, an oil analyst at Dresdner Kleinwort Wasserstein. “The debate is whether Saudi Arabia will agree with that.”

The return of Iraqi supplies will also be a challenge for OPEC. Production may resume from Iraq’s northern fields as early as May, the US military has said. Resuming exports depends on deciding who will sell the oil.

Indonesia will ask OPEC to lower daily oil production by as much as 2 million barrels, the country’s oil minister, Purnomo Yusgiantoro, has said. Venezuela, Qatar, Algeria and Iran have said markets have too much oil, signalling support for a cut.

Oil consumers, including the International Energy Agency, representing 26 industrialised countries, urge caution, saying supplies are needed to replenish inventories. US crude stocks are 14% lower than a year ago and a reduction in output would threaten to bring higher fuel bills at a time of slowing economic growth.

Algeria, OPEC’s third-smallest producer, has called on OPEC members to comply with their targets. In comments that boosted world prices on Thursday, Iran, the second-largest OPEC producer, said any reduction should come from the quotas.

Saudi Arabia has yet to signal its policy. State-owned Saudi Aramco in May will fulfil all oil contracts to customers in Europe, Japan and South Korea, traders said after seeing notices from the oil producer.

Brent crude in London will fall below $20 a barrel in the third quarter from about $25 now if OPEC holds supply near present levels, the CGES said in a report. Should OPEC adhere to the quota, prices will rise to $27.90 next quarter, the group forecast. Iraq will be able to start pumping oil from its northern fields in weeks because of limited damage to installations, the US military has said. Production in the south, where damage is greater, can’t resume for three months.

As a point of protocol, OPEC headquarters invited Saddam’s oil minister to attend Thursday’s meeting. The whereabouts of Amer Rasheed are unknown.

Iraq will send a delegation led by Major General Jawdat al-Obeidi to the group’s meeting Thursday, Reuters reported yesterday, citing an Iraqi opposition official.