channelnewsasia.com First created: 14 April 2003 1945 hrs (SST) 1145 hrs (GMT) Last modified: 15 April 2003 0557 hrs (SST) 2157 hrs (GMT) By Dawn Teo

Oil prices have dropped about 30 percent since the start of the war in Iraq, sparking concerns that a possible oversupply could cause prices to crash soon.

But analysts believe the Organization of Petroleum Exporting Countries (OPEC) can contain the fall.Advertisement They are banking on signs the oil cartel will decide to cut production when they meet later this month or in early May.

Crude prices continued sliding on Monday, down 1 percent in Asian trade, on prospects that Iraqi oil could start flowing in coming weeks.

The US is keen to see Iraqi oil pumping as soon as possible to help fund the country's reconstruction.

But that means trouble for other OPEC members, which have been bumping up supplies to counter disruptions from Iraq and other producers.

Ong Teng Tong, Senior Energy Consultant, Itochu Petroleum, said, "Even if they cut, we still think the oil prices may still go down because right now, Nigeria is probably back to normal production and Venezuela, there was a big strike about 2 months ago. They are practically back to normal."

There are problems on the demand side as well.

As winter draws to a close in the second quarter, demand for heating and therefore crude oil tends to fall.

What is worse, many airlines have slashed their routes due to the spread of the Severe Acute Respiratory Syndrome virus, so they are buying less fuel as well.

Still, many analysts predict oil prices will stabilise at between US$24 and US$26 a barrel.

That is roughly the mid-point of OPEC's own target range, which members like Indonesia and Algeria say, is achievable.

War in Iraq - Channelnewsasia.com's special coverage

<a href=economictimes.indiatimes.com>REUTERS-Economic Times India MONDAY, APRIL 14, 2003 07:34:35 AM ]

CARACAS: Venezuela is ready to back any decision by the Organisation of Petroleum Exporting Countries (Opec) to reduce output in order to keep prices within the cartel's preferred $22-28 a barrel price band, said President Hugo Chavez.

If it is necessary to cut, we would be ready to back that Opec policy, Mr Chavez told reporters during a press conference. If we have to cut production by one million barrels per day (bpd), or 1.5m bpd, or 1.8m bpd, we would be ready to cut, Mr Chavez said.

The Opec, which increased output ahead of a US-led attack on Iraq, has become concerned that world oil markets are oversupplied and is planning an emergency meeting to discuss cuts to keep prices in its preferred range. Concerns about an Iraqi supply disruption before the war helped to bolster oil prices. Prices have fallen since the war started despite the interruption of Iraqi shipments, settling at just over $28 a barrel for US crude on Friday after flirting with $40 a barrel earlier in the year.

The cartel could decide just to rein in extra supplies it pumped before the war began, or go further and cut official production quotas. Venezuelan oil minister Rafael Ramirez on Thursday called on the cartel to reduce output to comply with quotas, and said Opec would work with other large producers to support prices.

Mr Ramirez agreed with comments from Opec president Abdullah al-Attiyah last week that oil markets are oversupplied by around two million bpd.

Mr Attiyah also said the oversupply could grow to over four million bpd with the restoration of full Nigerian output and the resumption of Iraqi oil exports. About 40% of Nigeria's 2.2m bpd of output was shut-in by ethnic unrest in the western Niger Delta last month. The cartel is considering a range of dates for its emergency meeting, between April 24 and May 7.

Venezuela, the world's No 5 oil exporter, is recovering from a two-month national strike started December 2 by foes of Mr Chavez that cut output from more than 3.1m bpd to 40,000 bpd at its low point.

Government officials say output has been restored close to pre-strike levels despite Venezuela's official Opec quota of 2.8m bpd. They say Opec has allowed the South American member-state to raise production above agreed limits in order to make up for production lost during the strike.

LE MONDE | 24.03.03 | 13h34   •  MIS A JOUR LE 24.03.03 | 14h19

Le cartel des pays producteurs affronte une crise de légitimité et pourrait se voir imposer des réformes libérales par Washington, via Bagdad.

Vienne de notre correspondante

C'est à Bagdad que l'Organisation des pays exportateurs de pétrole (OPEP) est née, en septembre 1960. Est-ce à Bagdad que sera signé son arrêt de mort, avec le paraphe du président George W. Bush ? La mise sous tutelle de l'Irak par les Etats-Unis, à l'issue de la guerre, est ressentie, au sein du cartel, comme une menace existentielle.

Samedi 22 mars, le vice-président du Venezuela, Jose Vicente Rangel, a comparé l'intervention américano-britannique à un "cheval de Troie, ou plutôt à un "char" de Troie", introduit au cœur de la forteresse pétrolière.

Malgré tout ce qui les distingue, les onze pays de l'OPEP (Algérie, Arabie saoudite, Emirats arabes unis, Indonésie, Irak, Iran, Koweït, Libye, Nigeria, Qatar et Venezuela) considèrent que le pétrole n'est pas une marchandise comme les autres, la légitimité des équipes qui les gouvernent étant fondée presque exclusivement sur leur capacité à redistribuer la rente pétrolière.

Tous sont dotés d'une législation qui limite, dans des proportions variables, l'accès des firmes étrangères à ce secteur très lucratif. Le basculement du domino irakien pourrait accélérer des réformes libérales qui sont déjà débattues en Algérie, et à peine esquissées en Arabie saoudite, pays dont la suprématie en tant que premier producteur mondial et principal fournisseur des Etats-Unis paraît mise en cause.

"UNE INFRACTION"

Pour couper court à tout risque de pénurie, le royaume wahhabite a pompé ces dernières semaines jusqu'à 9,4 millions de barils par jour, soit près de 90 % de son potentiel de production. Cela a été interprété comme un feu vert à l'offensive américaine, et a agacé d'autres membres de l'OPEP. Vendredi, le ministère iranien du pétrole rappelait que toute augmentation de la production par des membres de l'OPEP, sans réunion préalable du cartel, serait "une infraction".

Certes, Roger Diwan, directeur de Petroleum Finance Company Energy, basé à Washington, estime que la production irakienne restera inférieure à 3 millions de barils par jour jusqu'en 2005, et qu'une "administration civile intérimaire", selon le terme consacré dans les plans américains, ne saurait prendre, à brève échéance, la décision de sortir de l'OPEP.

Mais le cartel devra vivre désormais avec cette perspective, l'opération "freedom Irak" étant conçue, par les "faucons" de Washington, comme le laboratoire des changements radicaux qu'ils veulent encourager dans tout le Proche-Orient.

Souhaité par l'administration Bush, en guise d'antidote à la récession, l'effondrement actuel des prix traduit aussi l'impuissance de l'OPEP à contrôler un marché où elle ne se pose plus en acteur politique, mais en alliée loyale des grands pays consommateurs – d'où sa décision de faire sauter, dès les premières heures de l'attaque contre l'Irak, la barrière symbolique des quotas.

Le directeur de la revue Petrostrategies, Pierre Terzian, se dit choqué de ce "tropisme pro-occidental" qui fait peu de cas des besoins des pays producteurs, et met le cartel à la merci de la moindre secousse.

L'année 2003 s'annonce difficile pour l'OPEP. Elle a commencé avec l'affrontement, au Venezuela, entre le président Hugo Chavez et une opposition soutenue par Washington, au cours de la longue grève du secteur pétrolier. Ce conflit pourrait rebondir lors du référendum prévu cet été. Elle se poursuit avec la guerre en Irak, mais aussi par des troubles dans le sud du Nigeria où, sur fond de campagne présidentielle, des minorités ethniques revendiquent une part substantielle de la rente pétrolière, contestant que les gisements offshore, les plus prometteurs, soient exclus du système de redistribution au profit des multinationales. Venezuela, Irak, Nigeria : trois pays-clés dans la stratégie de diversification énergétique des Etats-Unis, et dont la défection serait fatale au cartel.

Joëlle Stolz

Forbes.com-Reuters, 04.12.03, 6:32 PM ET

CARACAS, Venezuela (Reuters) - Venezuelan President Hugo Chavez, who has condemned the U.S.-British invasion of Iraq, said Saturday he believed the future government of the oil-rich country would probably withdraw from the OPEC oil exporters' cartel.

Venezuela and Iraq are members of the 11-nation Organization of Petroleum Exporting Countries. U.S. officials have begun trying to set up a transitional government in Iraq after Saddam Hussein's rule collapsed before the onslaught of U.S. and British military forces.

"It's not clear exactly how it (the new Iraqi government) will be formed. It's very probable that Iraq will stop being part of OPEC," Chavez told reporters in Caracas.

"Iraq is one of the biggest (oil) producers in the world and, above all, it has some of the largest reserves of oil. With this, they will certainly try to influence (world oil) prices," he said.

The left-wing Venezuelan leader, who infuriated Washington three years ago by traveling to Baghdad to meet Saddam, is a leading supporter of OPEC and its coordinated price support policies in the world oil market.

Chavez said the U.S.-British invasion of Iraq had weakened OPEC and added the cartel would seek to defend oil prices at an upcoming emergency meeting.

Venezuela, the world's No. 5 oil exporter, faces a sharp economic recession following an opposition strike against Chavez in December and January that slashed petroleum production and exports and choked off vital oil revenues for the government.

Since the strike fizzled out in February, the government has restored output and export shipments.

Chavez said Venezuela was now producing around 3 million barrels per day of oil.

But he repeated his country's willingness to reduce oil output to support prices if OPEC decided on this course of action as a group.

Despite Chavez's opposition to the war in Iraq, his government has said it is guaranteeing oil shipments to clients in the United States, which normally receives more than 13 percent of its oil imports from Venezuela.

The Inside VC Network

LONDON -- OPEC should think twice about cutting production to boost sagging oil prices because supplies remain short and the immediate outlook remains cloudy, the International Energy Agency said Thursday.

But OPEC's president, Abdullah Hamad bin al-Attiyah of Qatar, said Thursday in Paris that the world's oil markets are glutted, and the resumption of Iraqi oil production could make that worse.

Officials at the Organization of Petroleum Exporting Countries said Monday that oil ministers planned to meet April 24 in Vienna, Austria, whether or not the war in Iraq has ended.

Most OPEC members have been producing at maximum capacity to keep supplies plentiful during the war. Oil ministers, however, fear OPEC might be oversupplying the market just as demand starts falling to its seasonal low.

The Paris-based IEA, which represents the world's wealthiest countries, said stocks were low in member nations, and there were doubts about the export situations in Iraq, Nigeria and Venezuela.