OPEC to cut output to avoid price collapse

OPEC to cut output to avoid price collapse

Agence France-Presse, Doha

OPEC can be expected to agree to slash production at a ministerial meeting in Qatar on June 11 to avoid a price collapse, OPEC President Abdullah bin Hamad al-Attiyah told AFP on Monday, strongly defending Iraq's position within the oil cartel.

"The cut will be the topic that will be very carefully discussed," Attiyah said, noting that confusion about Iraq's return to the market and inventories made it difficult to set a figure.

"I believe maybe we will cut it because we believe that in all earnestness there will be more oil in the market and the market cannot accept it.

"We don't want to see this huge floating of oil, collecting dramatically and putting pressure on the oil price. We don't want to see ourselves in the position of 1999," when prices collapsed to $10 a barrel on oversupply."

Iraq's return to the market after the U.S.-led war is predicted to come around the end of June, but Attiyah said it was difficult to read.

The Organization of Petroleum Exporting Countries would "also treat very carefully the re-entry of Iraq to the market," at the June talks in Doha.

"It's really very difficult," he stressed, recalling conflicting reports of the exact timing and how quickly Iraq would reach pre-war daily average production of 2.7 million barrels per day (bpd).

"This also we have to study very carefully," he said. "The analysis is very confused now about when Iraq is coming."

He took strong issue with U.S. suggestions that Baghdad may pull out of OPEC.

"I heard a lot of rumors saying maybe Iraq will withdraw," Attiyah said in his office at Qatar's energy ministry. "Is it true? I don't believe it. Is the interest of Iraq tomorrow to see the oil price at six dollars? I don't believe it. I don't think this a pragmatic answer."

Washington's chief executive officer of Iraq's oil advisory board, Philip Carroll, told the Washington Post on May 17 Iraq may be best served by ignoring OPEC quotas and producing as much oil as it can.

Attiyah has already said that for oil-related matters OPEC would not recognize the U.S. as a representative of Iraq, which boasts the world's second largest oil reserves, and would await a new government in Baghdad.

Iraq for the past decade has remained an official OPEC member but has exported its oil under United Nations (UN) auspices as part the sanctions regime imposed following its 1990 invasion of Kuwait.

Sanctions were lifted last week, paving the way for exports under the post-war U.S. administration in Iraq.

Iraq's last OPEC quota in July 1990 was 3.14 million bpd, the same as Iran and about 14 percent of OPEC's production ceiling. Before the war Iraq's antiquated oil industry could manage to pump an average of 2.7 million bpd.

Crude slumped after OPEC's unexpected move to raise output ceilings from June 1 while also trying to crack down on quotas busting.

However, prices have since risen despite the removal of UN sanctions.

In London, benchmark Brent North Sea crude oil for July delivery rose to $26.34 per barrel in late Friday trading from $26.15 a week earlier.

In New York, light sweet crude June-dated futures reached $29.30 from $28.75 the previous week, but closed at $29.16 for July delivery.

Dealers took fright after low weekly U.S. oil inventory figures were released on Wednesday.