OPEC eyes steady oil production as US and Iraq face off

19/09/2002| IslamWeb

OPEC is expected to leave oil production unchanged with current levels seen as enough to offset any price rise stemming from the Iraqi war risk. OPEC president Rilwanu Lukman said the 11-nation oil cartel had reached a consensus not to increase oil production as current stocks were adequate for global demand.

"There's been an agreement, a consensus if you like, not to increase volume," he told CNN in an interview.

Algerian energy minister Chakib Khelil also told reporters: "There is a general understanding that we will leave output as it is."

His comments followed an agreement in principle reached late Wednesday to maintain production at 21.7 million barrels a day while targeting oil prices at between 22 and 28 dollars a barrel.

OPEC had come under intense pressure to increase production and rein in prices to shore-up flagging global economies after oil shot beyond 30 dollars a barrel in August amid fears of a US-led war against Iraq.

Those fears eased after Baghdad said it would allow UN weapons inspectors unfettered access across Iraq and a decision not to increase production was expected to be formally announced later Thursday.

US President George W. Bush has warned the United Nations not to be "fooled" by Baghdad's offer, however, while drafting a resolution for the US Congress authorizing action against Iraq.

Lukman said there was also a danger in acting against countries which have breached their quotas and exceeded capacity.

He said that to take up to another 2.0 million barrels a day out of the market would cause prices to shoot beyond 30 dollars a barrel.

According to sources close to the conference, the ministers could meet again in December after the holy month of Ramadam when oil prices could be re-assessed.

The agreement in principle to maintain quotas for the rest of 2002 was struck during a meeting between Kuwait, Saudi Arabia, Qatar and Algeria.

Saudi Arabia, which, with the world's largest oil reserves, dominates the Organization of Petroleum Exporting Countries (OPEC), was expected to push for increased production to ease price pressures ahead of the northern hemisphere winter.

The move was opposed by Indonesia, Qatar, Kuwait and Venezuela which argued Iraq and the prospect of war against a US led-coalition were responsible for the price spike and not issues of supply and demand.

"There is no logic to increase production where there is no shortage of supply," Qatar's energy minister Abdullah bin Hamad Al-Attiyah said Wednesday.

Saudi oil minister Ali al-Nouami has made no comment.

Analysts said an additional three to five dollars a barrel had been factored into oil prices due to the situation in Iraq and oil was expected to trade at between 25 and 28 dollars a barrel if quotas remain unchanged.

Ken Koyama, an oil analyst at the Institute of Energy, Economics, Japan, said Iraq aside, OPEC anticipated only a modest rise in oil demand which would be tempered by a global economic slowdown, particularly in the United States and Japan.

He said while gasoline accounted for 50 percent of oil demand in the United States, OPEC's anticipated decision was also related to depressed demand for jet fuel in the United States which has dropped by 10 percent year-on-year since September 11.

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Rilwanu