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OPEC announces no change in oil output, braces for Iraq to resume oil shipments Soon after the OPEC delegates met, the U.N. Security Council voted to extend the U.N. oil-for-food humanitarian program for Iraq by The Associated Press
OPEC’s decision not to increase oil output beyond current levels offered little to cheer consumers, but some energy analysts suggested that motorists and buyers of home heating oil might still benefit if Iraq moves quickly to resume its crude exports.
The Organization of Petroleum Exporting Countries agreed July 3 to stick with its existing production quotas and to meet again in September to review market conditions at that time.
Meanwhile, the cartel braced for softer crude prices as Iraqi President Saddam Hussein showed a willingness to resume the oil shipments he suspended a month ago in a dispute with the United Nations.
“Maybe Saddam has done the American consumer a favor,” said Peter Gignoux, head of the petroleum desk at Salomon Smith Barney in London. “I guess the consumer comes out the winner in this because prices will come down.” U.N. extends oil-for-food program Soon after the delegates met at OPEC headquarters in Vienna, the U.N. Security Council voted to extend by five months the U.N. oil-for-food humanitarian program for Iraq which allows Baghdad to sell unlimited amounts of oil provided revenues are used to buy food, medicine and other essentials.
Iraq had vigorously objected to a U.S.-backed British proposal to overhaul sanctions imposed after Baghdad’s 1990 invasion of Kuwait. In the face of Russian opposition, Britain abandoned the plan in favor of a simple rollover of the oil-for-food program now in effect.
The head of Iraq’s OPEC delegation, Saddam Hassan, told reporters earlier that Iraq was prepared to renew its daily exports of 2.1 million barrels of oil “within a week” but only if the Security Council did not attach any conditions to an extension of sanctions.
“As long as it is a straightforward extension ... we are ready,” Hassan said. Short-term impact possible OPEC president Chakib Khelil told a news conference that a resumption in Iraqi exports might have a short-term “psychological” impact on oil markets but added that OPEC expected prices to stabilize later in July and August whether or not Iraq comes back to market.
“There was a complete consensus on not increasing production at this stage,” he said after the OPEC meeting.
OPEC pumps about two-fifths of the world’s oil, with an official production of 24.2 million barrels a day.
Several oil ministers played down Iraq’s potential impact on prices.
“It’s just another source of supply and we have said we will handle either shortage or glut in the market,” Saudi Arabian Oil Minister Ali Naimi told reporters just before the meeting. Saudi Arabia is OPEC’s biggest producer.
In fact, Naimi foresaw an increase in seasonal demand for crude as refiners begin processing heating oil for sale this winter.
“We will probably see (inventory) withdrawals in the next few months,” he said. Iraqi oil not likely to collapse prices Mehdi Varzi, senior energy consultant at London-based investment bank Dresdner Kleinwort Wasserstein, agreed that oil prices were unlikely to collapse if Iraq restores the exports it suspended on June 4.
At the same time, he said, “I don’t see why prices should spike, unless there’s a rebound in the world economy.”
OPEC delegates plan to meet again Sept. 26 to review market conditions at that time. A possible decrease in demand due to the slowing U.S. economy and a downturn in growth in Europe was “our main concern,” OPEC Secretary-general Ali Rodriguez told the news conference.
However, Leo Drollas, chief economist at the London-based Center for Global Energy Studies, warned that the rising demand for heating oil was sure to push up crude prices in the fall and winter. “The U.S. is out of the woods as far as gasoline is concerned, but in Asia and Europe, the demand for oil is starting to build up again,” Drollas said.
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