Experts stress OPEC's decision to roll over production ceiling shows its commitment to stabilise market.

<a href=www.middle-east-online.com>Middle East OnlineBy Amelie Herenstein - DOHA

OPEC's decision not to lower its oil production ceiling before Iraq resumes its exports demonstrates commitment to stabilise the market, experts said Thursday.

The Organisation of Petroleum Exporting Countries "probably didn't have a choice, this is probably the wisest decision in the short term," said Barbara Shook from the New-York based Energy Intelligence Group (EIG).

The cartel decided at an extraordinary meeting here Wednesday to roll over the ceiling of 25.4 million barrels per day (bpd) at least until July 31, when it will meet again in Vienna.

The meeting will assess the market situation in view of the likely resumption of Iraq's oil exports which stopped in March, prompting the ten other members - Saudi Arabia, Iran, Venezuela, UAE, Nigeria, Kuwait, Libya, Indonesia, Algeria and Qatar - to make up for the lost output.

The US-appointed interim head of the Iraqi oil ministry Thamir Ghadhban has said his country's production would reach 1.5 million bpd at the end of the month, of which nearly one million bpd will be exported.

But he said production would not return to it pre-war levels of around 2.7 million bpd for at least a year.

As prices are high, inventories low and Iraq's return to the market remains uncertain, OPEC opted for the status quo.

"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," said the final statement of the Doha conference.

"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" with current quotas, it added.

OPEC president and Qatari oil minister Abdullah Al-Attiyah said the July 31 meeting will be held even if Iraq does not resume exports, in order to "assess the market".

The cartel's goal is to maintain the price of its basket of crudes within a 22 to 28 dollars per barrel band.

"They are trying to micromanage the market. They've met every six to eight weeks since December," pointed out the EIG's Shook.

While Attiyah declined to speculate on the volume of a potential cut at the end of July, Shook said she would not expect any at all if the situation of the Iraqi oil sector is confirmed to be very degraded.

"The situation appears to be very very bad. I wouldn't expect any further cuts in July, especially if prices continue to be where they are," above 30 dollars per barrel for US benchmark crude West Texas Intermediate, she said.

She also said that the fact that they are meeting every six weeks, and not only twice a year as required, facilitates compliance with quotas.

"Since no enforcement power exists, OPEC accords are generally gentlemen agreements. The more often they meet, I think, the easier it is for them to behave like gentlemen. It keeps it fresh in everyone's mind."

Mexico's undersecretary for hydrocarbons, Juan Antonio Barges, also described OPEC's decision to roll over the production ceiling as "reasonable".

Mexico and four other exporters that are not members of the cartel - Russia, Angola, Oman and Syria - were invited to the Doha meeting.

Attiyah hinted that OPEC expected them to reduce their production should the organisation decide to do so in the future.

The flag of Iraq, where the organisation was born 43 years ago, was present in the hall of the Doha meeting, but its seat was vacant.

The US-British coalition ruling post-war Iraq has said it would be up to a future "representative" Iraqi government to decide whether the country remains inside the organisation.

<a href=www.arabtimesonline.com>Arab Times Online, DOHA, June 11, (Agencies): Opec announced 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 group in Qatar. "Today we reconfirmed this agreement. We hope there will be no overproduction (above quotas) during this period," 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 group 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 group 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 group 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. "Cooperation 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 cooperate with Opec. Kuwait Minister of Information and Acting Minister of Oil Sheikh Ahmad Al-Fahad Al-Sabah said Wednesday that the extraordinary meeting for the oil producing countries Opec launched in Doha will follow-up the international oil market. Sheikh Ahmad Al-Fahad told the press that the current oil prices are excellent, and within the Opec set range 22-28 dollars per barrel. Also: DOHA: Opec cannot permit Iraq to attend meetings of the group while Baghdad remains under the rule of an occupying US-led authority, oil ministers said on Wednesday. "We cannot have relations with Iraq until there is an internationally recognized government, that is a consensus," said Venezuelan Oil Minister Rafael Ramirez. "This does not mean we do not want Iraq in the organization. We do want Iraq in Opec and we think Iraq will want to stay in Opec because they will need a reasonable price for oil," he said. Ministers said the position, agreed during a ministerial meeting on Wednesday, was common to all international organisations that hold diplomatic status. "Opec is not a special case," said Opec President Abdullah al-Attiyah of Qatar.

The Associated Press June 12, 2003 From left, OPEC Secretary General Alvaro Silva Calderon, president of the conference and the Minister of Energy and Industry from Qatar; Abdullah bin Hamad Al Attiyah, Emir of Qatar; Sheik Hamad bin Khalifa Al-Thani; and Saif bin Ahmed Al-Ghafly, chairman of the OPEC Board of Governors, sit Wednesday at the opening ceremony of 125th Extraordinary Meeting of the Organization of the Petroleum Exporting Countries in Doha, capital of Qatar.Oil prices surged above $32 a barrel for the first time since mid-March on Wednesday, as traders fretted about scant supplies, the rising price of natural gas and a signal from OPEC that production cuts might be on the horizon. The weak dollar is also making it more expensive to buy oil, analysts said. Crude for July delivery finished up 63 cents to $32.36 on the New York Mercantile Exchange on Wednesday. The last time Nymex oil futures closed higher than $32 a barrel was March 17, a few days before the start of the war in Iraq. Prices then fell sharply after U.S.-led forces quickly secured Iraq’s most abundant oil fields and analysts speculated that the country’s supply would make up for lost production elsewhere. As the military conflict wound down, crude futures dropped as low as $25.24 on April 29. But prices have risen steadily since then as it became clear that Iraq’s oil industry was in bad shape, and the country’s crude would not flood the global market anytime soon. “The market is starting to wake up to the fact that while Iraq is going to be a big deal down the road, near-term it isn’t going to be much” of a contributor to world supplies, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. Iraq, which pumped around 2.1 million barrels a day before the war, is now producing below 1 million barrels a day. On the domestic front, the Energy Department reported Wednesday that commercial inventories of crude fell last week by 4.6 million barrels to 284.4 million barrels, or 12 percent below year ago levels. Refiners are drawing down crude inventories in order to meet the nation’s gasoline needs at the start of the busy summer driving season. Supplies were already low because of a two-month strike that paralyzed oil production in Venezuela, the world’s fifth-largest petroleum exporter. Flynn also cited the rising price of natural gas, a problem that was highlighted before Congress on Tuesday by Federal Reserve chairman Alan Greenspan. Greenspan warned that high natural gas prices could be a drag on the economy, particularly in the manufacturing sector. With natural gas futures trading higher than $6 per 1,000 cubic feet, or roughly double what they were a year ago, manufacturers are choosing to run their plants on crude-derived fuels instead of natural gas and that, too, is driving the price of oil higher. The Organization of Petroleum Exporting Countries offered little relief to the market on Wednesday, when ministers meeting in Doha, Qatar, decided to keep production levels steady through July. The oil cartel left open the possibility of a production cut at its next meeting July 31. Fahnestock & Co. oil analyst Fadel Gheit said that while OPEC ministers publicly expressed fears about the potential for an oil glut once Iraqi production reaches pre-war levels, privately they are “laughing all the way to the bank.” Still, he said speculation by U.S. traders is driving prices higher more than anything else. “It’s not because there is a physical shortage,” he said. “It’s all psychology.”

Dateline: undefined/Sun Jun 22 22:23:42 2003/undefined This Day Online, By Mike Oduniyi, with agency report

The Federal Government said yesterday it would relaunch negotiations with the Organisation of Petroleum Exporting Countries (OPEC) in a bid to get a higher oil production quota for Nigeria. But OPEC. at an extra-ordinary meeting held in Qatar yesterday, decided to maintain its current production ceiling of 25.4 million barrels per day (bpd). This leaves Nigeria's production quota at 2.094 million bpd compared to her capacity of 2.6 million bpd. The Director, Department of Petroleum Resources (DPR), Mr. Macaulay Ofurhie said in an address delivered at a seminar on offshore oil and gas technology in Lagos, that the need to renew the bid for a higher OPEC quota was based on {he challenges posed by successes Nigeria had recorded in deep offshore exploration. "As production commences from the deepwaters, Nigeria as a strong member of OPEC and the only one with large deepwater discoveries certainly will need to renegotiate her quota allocation level with OPEC," said Ofurhie, who was represented at the event by a-. Deputy Director in DPR, Mr. Kayode Oloketuyi. According to the DPR chief, the Federal Government needed to get an increased OPEC quota so as to continually convince the deepwater operators that "Nigeria is an investment friendly country and to guarantee sustainable development of the nation's deepwater assets." Ofurhie said that the discovery of giant oil and gas fields in the Nigerian deepwaters and the unfolding potentials in its offshore basins are indications that with right planning and sustained growth, Nigeria will emerge as the main center of deepwater activities in the Gulf of Guinea, as Brazil currently is for the Gulf of Mexico. Oil workers last weekend had expressed concern that oil companies under the present OPEC quota regime, will not be able to maximise output from these new fields, mostly located in the deep offshore, on which several billions of dollars have been invested. They also alerted the Government on the danger posed by the quota restriction to its revenue earning power. Oil fields soon to go into production include Shell's Forcados Yokri and Bonga fields. Total's Amenam/Kpono field and ExxonMobil's Erha field. Oloketuyi later told THISDAY on the sideline of the seminar that the Federal Government was approaching the demand for higher quota using political and technical means. "We have submitted the technical details of what we have been doing in the deep offshore where we are. The political approach, which include demonstrating our economic needs as well as the need to sustain our democracy will be handled by government," he said. The seminar was organised under framework of institutional co-operation programme between Nigerian government and its Norwegian counterpart. According to Charge d'Affaires of the Norwegian Embassy in Nigeria. Kristin Teigland. the seminar aimed at sharing experiences enhance transfer of technology, assist in capacity and competence building. Meanwhile, OPEC ministers ended a meeting in the Qatari capital of Doha yesterday, ieaving the group's production levels unchanged. OPEC President Abdullah bin Hamad al-Attiyah, said the 11-nation group would meet on July 31, this year to reassess the situation. Al-Attiyah said that the July meeting would look at the impact of Iraq's return to the oil market and that OPEC would consider all options to maintain its interests. Contrary to the widely held belief that the group would cut down on production to accommodate the entry of Iraqi oil into the market, OPEC's decision was said to be hinged on the fact that Iraq oil would not be reaching dhe market fast enough. Analysts said prices had not retreated because Iraq has been slow to revive production, and political unrest in Venezuela and communal crises in Nigeria, had suppressed in the two influential OPEC member-nations. Iraqi oil officials appointed by the US. occupation authority said on Monday that crude exports would not resume until month's end and that it would not reach pre-war levels until the middle of 2004. Crude oil prices were at between $27 and $29 a barrel yesterday.

But prospects for big new Iraqi supplies remain a wild card   Iraqi workers inspect equipment at the Basra oil refinery in mid-May. Almost all of the 2,600 Iraqi employees at the plant are now back at work.  

By John W. Schoen <a href=www.msnbc.com>MSNBC

June 11 —  OPEC ministers decided Wednesday to leave production quotas just where they are. With crude oil prices high, and world stockpiles at historic lows, the case for cutting output was too hard to make. But the cartel will be keeping a close eye on how quickly U.S. forces and Iraqi workers can increase Iraqi oil exports — and what impact those new supplies have on prices.         WITH OIL PRICES hovering above $31 a barrel, comfortably above OPEC’s price target of $22-$28, even the group’s most militant members had a hard time making the case for cutting the current quota of 25.4 million barrels a day. Still, the big worry for the Organization of Petroleum Exporting Countries is that a bigger-than-expected flow of Iraqi oil could send prices falling quickly.        So OPEC hedged its bets, calling for another meeting July 31.        “Then we will have some options — either to cut production or not. That is what we need to decide,” said OPEC President Abdullah bin Hamad al-Attiyah.        The group Wednesday also gave the usual warnings to member states to stop exceeding their quotas and comply with the production schedule. With prices above OPEC target price range, producers have been overpumping their quotas by about 1.5 million barrels a day, lifting overall output to 26.9 million barrels.        But the main threat to OPEC’s control of oil prices is the resumption of Iraqi output, now under the control of U.S.-led coalition forces. Iranian Oil Minister Bijan Namdar Zanganeh said earlier Wednesday that OPEC “must be very careful in handling Iraq’s return.”        Iraqi officials last week began accepting bids for about 10 million barrels of oil in storage that was produced before the U.S.-led invasion in March. But it’s a lot less clear how soon the country’s creaking oil infrastructure can be patched together well enough to begin exporting in significant volumes. Looting and sabotage since the war, on top of 12 years of decay under U.N. sanctions, have left Iraqi oil facilities badly crippled. Iraq, which was excluded from OPEC quotas while under U.N. sanctions, pumped about 2.5 million barrels a day, including crude for domestic consumption. Iraqi oil officials have said exports would reach a million barrels a day by July, and could reach 2 million barrels by the end of the year.        But some oil analysts say the current timetable for bringing Iraqi production back on line are too optimistic.        “I think the market has overestimated the ability or Iraq to start pumping oil,” said Phil Flynn at Alaron Trading.        OPEC members say they, too, have no idea how quickly Iraqi production will ramp up again.

       “The pace and the extent of the return of Iraqi crude to the market remain unclear,” said al-Attiyah, the OPEC president.        Iraq was not represented at the meeting.        Still, some OPEC ministers are concerned that they may overshoot production if they continue pumping at current levels — especially if a soft global economy continues to hold back demand. Since the cartel last set quotas, tight supplies have eased from two key members.        Venezuela, where a lingering strike cut earlier this year production to below 600,000 barrels per day, was producing an average of 2.1 million barrels a day in April, according to a Lehman Brothers report. And Nigeria’s output has likely risen after falling to below 2 million barrels a day in April. Those outages helped drain reserves to about 100 million barrels below the historical range for this time of year, the report said.

• Petroleum primer •  Oil and the markets All this means that OPEC has tried to hedge its bets. The group invited seven non-OPEC members to Wednesday meeting in Doha, including major producers Russia, Mexico and Norway, to coordinate another production cut if prices fall. OPEC is trying to head off another battle for market share between the two groups that sent prices sliding in late 2001.        Even if Iraqi production rises to pre-war levels quickly, oil prices may continue to draw support from extremely tight supplies.        Meanwhile, shortages of natural gas have sent the price of that fuel soaring. Federal Reserve Chairman Alan Greenspan in Congressional testimony Tuesday said it’s not likely that natural gas prices will fall soon. That helps support oil prices because it eliminates a cheaper alternative to crude for businesses, like power companies, that can switch fuels.

  High nat-gas prices seen into 2004

       The real worry is that, with U.S. forces in charge of Iraq’s oil production, OPEC now confronts a major new supplier under U.S. control. If Iraqi production rises quickly above pre-war levels, OPEC and other major oil producers will have to make a painful choice — either sharply cut production to maintain prices, or let prices fall and produce more oil to make up for lost revenues.        “They really don’t want to lose that market share,” said Robert Baer, a CIA veteran who now writes about the Middle East.        If OPEC members do comply with their quotas, an American national industry report has predicted that U.S. consumers may have to pay more per gallon as demand increases during the summer vacation months.