OPEC trying to restrain oil overproduction-Lukman

OPEC trying to restrain oil overproduction-Lukman

Robert Gibbons
Reuters
New York

OPEC President Rilwanu Lukman said on Monday he was concerned
about the level of the oil cartel's overproduction and that all
members were trying to restrain output.

The remarks suggested a shift of approach from top OPEC
officials who said earlier this month the group's quota-cheating
was being absorbed by world markets and not hurting oil prices.

"We are concerned about overproduction," he told Reuters in a
telephone interview. "The whole of OPEC is trying to restrain it.
Everyone is on board."

Lukman estimated that OPEC was producing around two million
barrels per day (bpd) above an official 21.7 million bpd ceiling
for 10 cartel members who have formal quotas.

A Reuters survey estimated that the cartel pumped more than 3
million bpd above the group's official ceiling in October.

Oil prices have fallen around 20 percent since late September
as traders expect rising production from OPEC -- which supplies
around a third of the world's oil -- to replenish lean
inventories in consuming countries.

Lukman said OPEC was worried oil prices would fall below the
$22 a barrel floor of the group's price target range in the
second quarter next year if producers did not rein in supply.

"Yes, we fear it. That is why we'll do everything to make sure
people are toeing the line and not overproducing," he said.

The higher supply from OPEC has in recent weeks outweighed
fears that military conflict in Iraq could disrupt crude flows
from the oil-rich Middle East.

Venezuela's state oil company PDVSA boss Ali Rodriguez, a
former OPEC Secretary-General, said last week there is a growing
danger that oil output increases by OPEC and other exporters
could flood world markets.

Concern over Middle East supply appeared to reemerge on Monday
as U.N weapons inspectors returned to Iraq for the first time in
four years. New York crude oil prices jumped more than $1 a
barrel to top $26.70.

The U.S. has threatened military action if Iraq does not
comply fully with renewed weapons inspections.

Lukman reiterated that OPEC producers would step in to meet
any shortfall if supplies were disrupted during a military
conflict.

"We don't know what is going to happen in the next few weeks
with the Americans and Iraq. We've always maintained that
whatever the disruption, if there is any disruption, we would
act."

OPEC will meet to decide production policy on Dec 12. Lukman
said there was no need to change production quotas while oil
prices were still in OPEC's $22-28 a barrel target band. OPEC's
basket of crude oil was valued at $23.10 a barrel before Monday's
price rise.