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OPEC Agrees to Maintain Its Oil Production Quotas

August 01, 2003|From Bloomberg News

OPEC, supplier of one-third of the world's oil, agreed Thursday to keep oil production quotas at their current levels, waiting for Iraqi production to fully recover from the war before cutting supplies.

The group, meeting in Vienna, decided to maintain its output target of 25.4 million barrels a day.

But members expressed concern about pumping too much oil later this year, assuming that Iraqi shipments ramp up.

"Everybody is waiting very anxiously to see when Iraq will come to the market," said Abdullah ibn Hamad al Attiyah, the Qatari oil minister who is the OPEC president. "We expect in September the Iraq situation will be more clear. We will interfere" then and cut output should members expect lower prices, he said.

Oil prices this year have averaged $28.30 a barrel in London, about $10 above the 1990s average, because of the war in Iraq and political turmoil in two key producing nations, Nigeria and Venezuela.

Near-term futures for the U.S. oil price benchmark, West Texas intermediate crude, eased 14 cents to $30.54 a barrel in New York on Thursday. The price has mostly held above the $30 mark since mid-June.

Iraq, formerly the third-largest Middle Eastern oil producer, has targeted output of 2 million barrels a day by the end of the year. Production last month was 640,000 barrels a day, a Bloomberg News survey showed.

"It's all a function of Iraq," said William Buchanan, a senior oil trader at Standard Bank in London. "If Iraqi oil comes back in force tomorrow, then [OPEC] will need to cut, but I think that's unlikely."

Despite some economists' concerns that high crude prices could limit a global economic recovery, members of the Organization of the Petroleum Exporting Countries showed no signs of seeking to raise production.

"The market is well-supplied," OPEC Secretary-General Alvaro Silva said.

Low inventories will help sustain prices at least for the rest of this year, according to the International Energy Agency, which advises oil consumers. Demand normally peaks during the Northern Hemisphere winter.

U.S. crude inventories stood at 277.3 million barrels last week, down 20% from a year ago, according to a government report.

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