RI calls for OPEC output cut to prevent price drop

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.