- The Washington Times - Monday, May 19, 2003

Price stability in crude-oil markets will remain the priority for Saudi Arabia and other major producing nations as Iraq resumes output and considers its future in OPEC.

“A steady price within a certain range: That’s the biggest concern we have,” said Nail Al-Jubeir, spokesman for the Saudi Arabian Embassy in Washington.

The chief U.S. adviser to Iraq’s Oil Ministry this weekend said that withdrawal from the Organization of the Petroleum Exporting Countries might be in Iraq’s best interest as the country looks to increase production.

Oil-cartel quotas might prevent Iraq from selling enough oil to meet reconstruction-revenue needs, said Philip J. Carroll, the U.S. adviser who oversees reconstruction of Iraq’s oil industry.

Iraq has the world’s second-largest proven oil reserves, second only to Saudi Arabia.

“It is going to take some time to adjust if Iraq goes out [of OPEC], but it will not affect the overall issue,” Mr. Al-Jubeir said.

Saudi Arabia is by far the oil cartel’s biggest producer. In April, the Middle Eastern kingdom produced 9.6 million barrels per day, the highest level since the OPEC quota system was instituted in 1982, according to the U.S. Energy Information Administration.

Iran was a distant second in OPEC production at 3.75 million barrels.

Higher OPEC production offset losses from the war in Iraq as well as political turmoil in Nigeria and Venezuela — all members of the 11-nation oil cartel.

Since then, OPEC leaders have called for lower production to maintain prices in a $22 to $28 per-barrel range. At a meeting last month, members agreed to reduce production by 2 million barrels a day to 25.4 million, effective June 1.

Crude closed at $28.83 per barrel on the New York Mercantile Exchange yesterday, down from $29.14 Friday. OPEC price targets are based on an average of crude-oil-pricing data from several countries, and the OPEC calculation is generally lower than public trading figures.

Iraq, one of the organization’s founding members, has not been a factor in OPEC production quotas because of U.N. restrictions and because, since the war started in March, the country’s oil exports have essentially stopped.

Analysts say it will take time for Iraq to have a government capable of deciding on OPEC membership and, regardless, the country is more than a year away from making a dent in OPEC’s quota.

Oil production has resumed, but Iraqi fields are pumping only 310,000 barrels daily.

“I don’t see Iraq pulling out [of OPEC] any time soon,” said Robert E. Ebel, director of the Center for Strategic and International Studies energy program.

“I think they would consider [leaving] only when they believe continuing membership would constrain growth … . That’s not likely to come until later this decade,” he said.

Iraq is about 1 years from reaching 3.5 million barrels per day of oil production, Mr. Ebel estimated.

Iraqi exports are likely to reach 1.5 million barrels per day during the third quarter, the Energy Information Administration estimated.

Under a U.N. oil-for-food program, Iraq was selling roughly 2 million barrels of oil per day in the months before the U.S.-led invasion.

Output in 1990 was about 3.5 million barrels per day, but oil fields have been damaged by war, neglect and looting.

More likely than a withdrawal from OPEC would be a temporary suspension from participation, said James Dobbins, director for international security at the Rand Corp., a policy think tank.

“Iraq is not going to have a government capable of making a decision like that for a year or two,” he said of leaving the organization.

OPEC also is trying to coordinate with major oil producers outside of the cartel.

The group invited Russia, Norway, Mexico and four other producers to its next meeting, June 11, in Doha, Qatar.

OPEC members are Venezuela, Algeria, Libya, Nigeria, Saudi Arabia, Kuwait, Iraq, Iran, United Arab Emirates, Qatar and Indonesia.

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