VIENNA, 13 October 2003 — OPEC, looking to cut production in order to keep oil prices from falling too far, is to call on its members to respect production quotas, an OPEC source said here yesterday.
The source said members of the 11-nation Organization of Petroleum Exporting Countries would call at a meeting tomorrow in Vienna for the organization to hold to its current quota of 24.5 million barrels per day (bpd), which is currently being exceeded by some two million bpd.
OPEC oil ministers were to begin arriving in Vienna later Tuesday. Analysts said deciding how output should be reduced, and by whom, could prove difficult.
In London, reference Brent North Sea crude for June delivery fell five cents to $25.80 a barrel. New York’s benchmark light sweet crude contract for May slipped 20 cents to $30.67 a barrel during early trading.
Traders said that fluctuations in the US price were largely caused by technical factors associated with the expiry of the May contract yesterday. “The oil market is waiting to see what happens at the OPEC meeting later this week,” said analyst Andrew Whittock at Williams de Broe.
It remained uncertain what the organization might decide on, said GNI trader Paul Goodhew. “People are kind of expecting a cut of production of around one (million) to 1.5 million barrels per day, but what OPEC actually gives us remains to be seen,” he said.
Over the weekend, OPEC President Abdullah ibn Hamad Al-Attiyah said that the group must act to curb a surplus of two million barrels a day on the market since the Iraq war. However, a dealer in Singapore with a regional trading firm, commented: “They (OPEC) should not complain too much since oil prices have held at relatively high levels.”
Among the factors clouding the group’s deliberations will be the continuing uncertainty over when Iraqi oil exports are most likely to resume and over how seriously the mystery virus SARS will affect the already sluggish world economy.
OPEC had announced in January an output increase, raising its combined output ceiling by 6.5 percent to 24.5 million bpd, to curb a surge in prices triggered by a strike in Venezuela and the threat of war in Iraq. Since then, OPEC members have produced over the quota as the price of oil soared up to $40 per barrel.
There is concern now that oil prices could collapse due to oversupply. A return to the quota “is the most likely scenario” to seek to adjust prices, the OPEC official said.
OPEC seeks to have oil prices within a target range of $22-$28 per barrel. With Iraq’s oil exports expected to begin flowing again following the US-led war to unseat the regime of Saddam Hussein, OPEC has been anxious to avoid a plunge in global prices through oversupply.
