RI calls for OPEC output cut to prevent price drop
A'an Suryana, The Jakarta Post, Jakarta
The Indonesian government will propose an oil production cut to the upcoming meeting of the Organization of Petroleum Exporting Countries (OPEC) to help prevent a drop in oil prices, Minister of Energy and Mineral Resources Purnomo Yusgiantoro has said.
He said that currently there was an oversupply of 1.5 million barrels per day (mbpd) to 2 mbpd in the oil market, as some members of the oil cartel had increased output beyond their respective quotas.
"OPEC members are pumping oil above OPEC's agreed supply ceiling. This must be stopped to prevent a further decrease in oil prices," Purnomo said on Thursday.
OPEC members will convene on April 24 in Vienna to discuss the current oil market situation.
The price of the commodity has been on the decline since the past week, following signs that the war in Iraq is almost over.
After shooting to beyond US$35 per barrel during the war, the oil price has now declined to around US$25 per barrel, still within OPEC's price range. However,there are fears that the price could continue to drop, particularly if Iraqi oil returns to the market and OPEC continues to produce beyond the agreed 24.5 mbpd quota.
Purnomo explained that the higher OPEC oil production was a result of the organization's previous decision, which allowed members to exceed their quotas in a bid to boost supplies, to help avoid soaring oil prices in the wake of war in Iraq.
"But it is time now for OPEC to urge large oil exporters, such as Saudi Arabia and the United Arab Emirates, to stick to their agreed production limits," said Purnomo.
Indonesia's state budget is heavily financed by revenue from oil exports.
Meanwhile, Iran has also called for an oil output cut.
"Currently there is a glut in the oil market, and if it is not controlled in the long term, oil prices will slide," Iranian Oil Minister Bijan Zanghaneh said at an international energy conference in Tehran.
"Any reduction in OPEC's output should be based on official quotas," and not on the actual production of member countries, added the minister.
"We need a decrease in production ... starting from the second quarter of 2003."
Zanghaneh was quoted by AFP as saying that Iraq, which was able to produce about 3 mbpd before the U.S.-led war launched against it on March 20, could quickly return to that capacity.
"If the sanctions were lifted, in a year's time Iraq's oil production could reach 3.5 million bpd ... thus resulting in medium- and long-term problems for the market," he said.
Head of the Iranian parliament's energy commission Hossein Afarideh, who is close to Zanghaneh, rejected the idea that Iraq could be given the same quota as Iran.
"There is no reason for Iran to accept this request", he stated at the International Oil, Gas and Petrochemical Fair.
He also warned, "Not abiding by the quotas might result in a price war."
"I hope that Iraq continues to remain an OPEC member. If Iraq produces more than what has been agreed upon, then Iran will not sit on the sidelines ... any increase in Iraq's production would destabilize the market," he added.
Iran's OPEC quota is currently fixed at 3.597 mbpd, while Iraq has been excluded from the quota system since its invasion of Kuwait in 1991.