OPEC To Maintain Current Output

OPEC ministers decided Wednesday to maintain current production levels until they meet again in September, the president of the oil cartel said.

Abdullah bin Hamad al-Attiyah said the 11-nation cartel would also hold an extraordinary meeting on July 31 to reassess the situation.

Al-Attiyah said 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.

Before the decision was made, Venezuelan Deputy Oil Minister Luis Vierma had said he thought OPEC might be able to keep its current output levels for the rest of the year.

And the Nigerian delegate, Rilwanu Lukman, a former OPEC secretary general, said: "I tend to agree with that."

Other delegates had also said they saw little reason to change OPEC's target production ceiling of 25.4 million barrels a day.

An aide to Iran's oil minister said the OPEC monitoring committee — which groups Iran, Nigeria, Kuwait and OPEC Secretary-General Alvaro Silva Calderon — would advise Wednesday's meeting that member states had to stop exceeding their quotas and comply with the production schedule.

Attracted by high prices, members of the Organization of Petroleum Exporting Countries have been exceeding their designated quotas and have oversupplied the market by about 1.5 million barrels a day.

The oil minister of the United Arab Emirates, Obaid bin Saif al-Nasseri, called for member states to respect their quotas.

"The market is comfortable, but we should think ahead to the third quarter," which begins July 1, al-Nasseri said Tuesday.

He estimated overproduction by the 10 OPEC nations, excluding Iraq, at 1.5 million barrels a day. That means the group is pumping 26.9 million barrels a day onto the market.

"We should look into reducing actual production of member states" rather than adjust the ceiling, al-Nasseri said.

"OPEC must be very careful in handling Iraqi's return," Iranian Oil Minister Bijan Namdar Zanganeh told reporters earlier Wednesday.

Iraq, which was excluded from OPEC's quota schedule during the 12 years of U.N. sanctions, says it hopes to export 1 million barrels a day by the end of June and 2 million barrels a day by the end of the year.

Analysts say that is too optimistic in view of the state of Iraq's oil industry, which suffered war damage, postwar looting, a chronic shortage of spare parts during the sanctions period. Before the war began in March, Iraq pumped around 2.5 million barrels a day.

Members of the 11-nation cartel differed over when Iraq was expected to resume oil exports, and when the OPEC would need to curb production in order to accommodate Iraqi supplies.

"The pace and the extent of the return of Iraqi crude to the market remain unclear," OPEC President Abdullah bin Hamad al-Attiyah said in his opening speech to Wednesday's meeting, at which Iraq was not represented.

Kuwait's acting oil minister, Sheik Ahmad Fahd al-Ahmad, said Iraq needed until September to raise its production to 2 million barrels a day, and that OPEC production could remain unchanged until then.

"From now until September, Iraq will need (to do) a lot to reach the level of production," Sheik Ahmad said. "For that, we still have time to continue our ceiling."

OPEC's al-Attiyah foresees Iraq pumping 1 million barrels a day of oil by the third quarter. He has cautioned producers to take early measures to avoid a glut and price crash.

An OPEC meeting before the scheduled one in September had been seen as necessary to discuss not only Iraq's return but also the high level of oil prices. Prices have hovered around the upper limit of OPEC price band of $22 to $28 a barrel.

OPEC's basket of seven crude oils averaged $27.53 a barrel on Monday. Oil prices hit a three-month high in New York, nearly reaching $32 a barrel.

On Tuesday, July contracts of light sweet crude traded as high as $31.76 a barrel and settled at $31.73 — up 28 cents. In London, North Sea Brent for July settled up 23 cents at $28.08 a barrel.

If OPEC members do manage to 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.

"Oil prices turned around in the past three weeks and are not falling," analyst Trilby Lundberg, whose Lundberg Survey queries 8,000 stations, told CBS Radio News. "Now they're up about a nickel's worth of pressure on gasoline prices."

Non-OPEC producers are also concerned about the impact of Iraqi oil when it comes on stream. Russia and Mexico sent delegates to the Wednesday meeting.