Sun, May 11, 2003 - Page 10 News List

OPEC chief calls for production cuts


Oil prices surged on Friday after OPEC president Abdullah bin Hamad al-Attiyah reportedly called for production cuts at a meeting next month.

New York's benchmark light sweet crude for June delivery gained US$0.74 to US$27.72 a barrel.

In London, the price of benchmark Brent North Sea crude oil for June delivery climbed US$0.47 to US$25.12 a barrel.

The market lurched upwards after al-Attiyah, who is also Qatar's oil minister, was quoted as saying the Organisation of Petroleum Exporting Countries (OPEC) must act to curb a glut.

"There is too much oil on the market and that has a bad influence on prices which have fallen dramatically," al-Attiyah told France's Le Monde newspaper in an interview published on Friday.

"The next meeting of OPEC members is planned for June 11 in Doha. OPEC is going to need to make new cuts in its production. It's on that date that we will decide by how much," said al-Attiyah, who is also the Qatari oil minister.

Prices had slumped after OPEC decided in April to cut production while also raising output ceilings to bring them closer into line with reality, providing a muddled message to the market.

Now the cartel seemed keen to try again, said Commerzbank analyst Jon Rigby in London.

"There is clearly a lot of pressure on to try to reset the level of production at an appropriate level ... and try to drag in the non-OPEC countries as well," he said.

"There is an invitation [to the June meeting] going out to some of the key non-OPEC producers, including Russia, Norway and Mexico.

OPEC has previously expressed concern that the global oil glut could swell further after Iraq crude returns to the world market, following the end of the US-led war to unseat the country's then leader, Saddam Hussein.

However this is now clouded with doubt due to a possible deadlock on how to administer Iraq's oil.

"The conventional wisdom is now that the Iraqi oil will not be back in the market soon. I don't agree," said Fahnestock and Company senior energy market analyst Fadel Gheit in New York.

"I think Iraqi oil will be back on the market in a couple of weeks because the US cannot afford to let this thing go on forever," he said.

"The US needs Iraqi oil back on the market to find money to rebuild and to make oil prices decline."

The UN Security Council met Friday for initial discussion of a draft US-backed resolution, which would lift sanctions against Iraq and put the country's oil-rich economy under US control for one year.

The US-backed draft also proposes cutting the proportion of Iraq's oil sales set aside to compensate Kuwait for a 1990 invasion and comes one month after US tanks rolled into Baghdad and Saddam Hussein's regime collapsed.

Anti-war council members including France and Russia are expected to challenge some of the draft's proposals.

Under the current system Iraqi crude can only be sold through a UN-administered oil-for-food programme, which is due to expire early next month.

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