Oil prices sideways, OPEC weighs of meeting in July

Oil prices sideways, OPEC weighs of meeting in July

LONDON (Reuters): Oil prices moved sideways on Tuesday as OPEC producers made clear they would not boost output this week to compensate for the loss of Iraq's exports but hinted at another meeting as soon as July to address supply.

The Organization of the Petroleum Exporting Countries' ministerial meeting in Vienna was expected to keep in place 2.5 million barrels per day (bpd) in supply curbs, resisting a knee- jerk reaction to Baghdad's cut-off in exports.

But initial talk of a potential July meeting has raised expectations of an output boost in the third quarter, when demand picks up and refiners begin to build stocks needed during the northern hemisphere peak usage winter season.

Benchmark Brent blend crude futures were trading six cents lower at $29.20 a barrel, erasing half of Monday's light gains, while U.S. light crude futures for July stood nine cents higher at $28.22 a barrel in overnight trade.

OPEC President Chakib Khelil, also Algeria's oil minister, reiterated on Tuesday he did not expected an output boost, a view expressed by several other ministers in Monday.

Those comments followed a Ministerial Monitoring Committee meeting that an OPEC delegate said would recommend to the full meeting to leave output quotas unchanged.

OPEC ministers are expected to meet at 1200 GMT (7 p.m. Jakarta time) with a formal meeting to follow in the afternoon, but most ministers seem to agree production should be maintained as inventories are adequate and prices remain within the $22-$28 a barrel range.

But OPEC could hold another emerging meeting in July, UAE Petroleum and Mineral Resources Minister Obaid bin Saif al- Nasseri told reporters. Kuwaiti Oil Minister Adel al-Subaih also said there "may be" a meeting next month.

In setting policy the cartel must consider Iraq's 2.1 million bpd of U.N.-monitored exports, nearly five percent of world exports, which Baghdad halted on Monday in protest of the United Nations' decision to extend the oil-for-food program for one month instead of the usual six.

Its OPEC representative Taha Humud Musa said the month-long cut-off would stay until early July. Beyond that, Musa said, Baghdad would have to look again at policy.

Baghdad was unhappy with an Anglo-U.S. proposal to redraw conditions for the oil-for-food program, in place since 1996, which allows Iraq to export oil. It sidesteps 11-year old U.N. sanctions imposed for its invasion of Kuwait in the Gulf War.

Analysts say Iraq has little incentive to restart exports soon, but OPEC does not want to be rushed into action only to have Baghdad return suddenly to the market, a move that could undermine the cartel's goal of oil price stability.

"We do not know what Saddam's gameplan is," Saudi Arabian Oil Minister Ali al-Naimi said on Tuesday. "Will this last a day, a week, a month? We don't know what the gameplan is."

Naimi reiterated that OPEC would not allow a market shortage to develop, saying that the loss of Iraqi exports for one month would indeed constitute a shortage.

The market was also watching U.S. fuel and crude oil stocks data to be released by the American Petroleum Institute after close of trade on Tuesday, to lend direction, dealers said.