|
Opec curb oil output { April 24 2003 } Original Source Link: (May no longer be active)
http://www.guardian.co.uk/oil/story/0,11319,942529,00.htmlhttp://www.guardian.co.uk/oil/story/0,11319,942529,00.html
Opec set to curb oil output
Mark Tran
Thursday April 24, 2003
Opec oil ministers meeting in Vienna were today expected to curb excess production in an attempt to prevent a collapse in oil prices.
The Saudi oil minister, Ali al-Naimi, said the oil cartel would "probably take very serious action" to deal with the problem of over-production - estimated at about 1.6m barrels a day above the agreed ceiling of 24.5m barrels a day. Most in Opec favour curbing excess supplies, rather than reducing the overall limit.
"Today's Opec meeting will be the most important in quite a while," a Deutsche Bank briefing note said. "We have previously argued that Opec will exert discipline on its members and achieve the 2m barrels per day cuts which are immediately required to prevent a glut in the market. Time will tell but, we could be staring at a $15 oil price."
Iraq will loom large, although there will no Iraqi delegate for the first time in the oil cartel's history. The prospect of an eventual revival in Iraqi crude exports was a key factor in Opec's decision to call an emergency meeting to reassess production levels.
In recent years, Iraqi oil production has been erratic as Saddam Hussein turned on and off supplies in support of his foreign policy goals so Opec found it hard to predict the volume of Iraq's exports from one month to the next.
With a new government yet to take shape in Baghdad, the speed and timing of resumption in Iraqi oil shipments is one of the biggest unknowns for Opec at a time when a glut threatens to drive down prices.
Crude prices have dropped by $6 to $7 a barrel to about $26 in just the last two weeks as traders anticipate more oil coming on the market.
Iraq yesterday restarted oil production, albeit in a small volume, when modest amounts of crude began flowing from its Rumeila South oil field to a storage tank near the southern city of Basra. It was the first time since the war that oil flowed through the country's largely undamaged pipeline network.
"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 Petroleum Finance, a Washington consultancy. All the same, he said, "It's a start."
Iraq, with 112bn barrels of proven reserves, could resume overseas crude shipments within weeks, say analysts. That poses a headache for Opec.
It will have to decide how much Iraq should export, with Baghdad intent on selling as much as it can to pay for reconstruction at a time when Opec wants to keep production levels down. Accommodating Iraq's future output could mean cutting back production from other members - a tricky prospect.
Many Opec members boosted their production before the outbreak of fighting in Iraq, to forestall a potential oil shortage. Market nervousness triggered a steady rise in crude prices - which almost reached $40 a barrel - prior to the war.
Now that the war is over, prices have tumbled, and some group members fear prices may fall further unless they try harder to comply with Opec's official output.
Opec's 11 members account for 40% of the world's oil exports and aim to keep the price of a barrel of crude oil between $22 and $28 by adjusting production.
|
|
