- The Washington Times - Wednesday, June 6, 2001

VIENNA, Austria (AP) OPEC members agreed yesterday to keep pumping oil at their current levels and to meet again in July to assess the impact of Iraq's suspension of its crude exports.

Delegates from the Organization of the Petroleum Exporting Countries announced the unanimous decision after a formal session at the cartel's headquarters in Vienna.

By meeting again next month, however, OPEC is taking a highly unusual step that indicates the seriousness with which it views Iraq's action. Ministers said the group will meet July 3 to review market conditions in the wake of Iraq's halt on Monday of its 2.1 million barrels in daily oil exports.

OPEC President Chakib Khelil said at a news conference after the meeting that global supplies of oil are "more than satisfactory," adding, "there is no need now for more supply."

"What concerns us is that we don't take undue decisions right now and regret it later because prices will collapse," Mr. Khelil said.

OPEC Secretary-General Ali Rodriguez said that if market conditions justified an increase in output in July, then "we will increase supply" at that time.

OPEC has an official output target of 24.2 million barrels a day, and its members pump about two-fifths of the world's crude. Although Iraq belongs to OPEC, it doesn't participate in production agreements with the group's other 10 members.

Iraq's move complicated what had been shaping up to be a straightforward decision by OPEC to keep pumping at current levels. Demand for oil historically increases in June, and Saudi Arabia is the only group member able to quickly make up much of the loss of Iraq's oil.

Saudi Arabian Oil Minister Ali Naimi told reporters earlier supply and demand for oil are "very well balanced" at present and that the ministers saw no need to boost output at present. There was no way of knowing the duration of Iraq's export suspension, he explained, adding: "There have been erratic [Iraqi] decisions before."

Iraq has suspended exports in the past, and its shipments have been somewhat inconsistent since December.

Mr. Naimi said Iraq's current halt in exports was "just one factor" in OPEC's decision to meet again next month.

"This is the time when other factors can also affect supply," such as hurricanes and extreme heat, he said. "I think it's very prudent for us to meet in July to really assess the situation in the third quarter and the fourth quarter."

Crude prices initially shot higher Monday on Iraq's announcement, then lost those gains as it became apparent from other OPEC ministers that the group was unlikely to allow a shortfall to occur.

Iraqi Deputy Oil Minister Taha Hmoud Mousa helped to calm the markets, telling reporters on Monday that his government has suspended exports for one month. The halt was made as a protest against the U.N. Security Council's decision to extend by one month instead of the usual six months the program under which Iraq can sell oil.

Non-OPEC member Russia said yesterday it would not boost oil exports in response to Iraq's cut, saying OPEC could pick up the slack.

In a speech at the start of the formal meeting, Mr. Khelil told his fellow delegates that OPEC is "ever mindful of the need to ensure that stable, low-cost supplies of crude will continue to contribute positively to sound economic growth in consuming countries."

In trading yesterday, July contracts of North Sea Brent crude rose 4 cents to $29.30 on the International Petroleum Exchange in London. On the New York Mercantile Exchange, contracts of light sweet crude for July delivery rose 11 cents to finish at $28.24.

The cartel's members are meeting as motorists in the United States are facing stiff prices at the pump, with some paying more than $2 a gallon for gasoline. OPEC says bottlenecks at U.S. refineries are the cause of the high prices.

"It is noteworthy that senior U.S. officials have absolved OPEC of responsibility for high product prices," Mr. Khelil said.

Some analysts believe the worst of the summer's high gas prices may already have passed.

"I personally think we're over the top," said Leo Drollas, chief economist of the Center for Global Energy Studies in London. He noted that U.S. refineries were operating at 96 percent of capacity and that gasoline imports were flooding into the United States.


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