Market strength tempts Opec to maintain output

The Opec oil cartel is expected to keep output limits steady at its ministerial meeting in Vienna on Thursday but may consider cutting production in September, Financial Times reported Wednesday.

The high price of oil - currently at the top end of the desired $22-$28 band for Opec's basket of crudes - has delayed any decision to change the group's 25.4m barrels a day quota until its next meeting in September.

The price has been supported by the slower than expected recovery of Iraq's oil production and historically low levels of crude oil inventories in OECD countries, particularly the US.

Abdullah Bin Hamad al Attiyah, Qatar's oil minister and Opec's president, told reporters on Wednesday: "I don't think Opec will do anything. Remember in Doha [at a meeting last month] we were supposed to cut, now we come to July and we were supposed to cut. So I think in September it will be an open agenda, I will not say 'yes'."

Opec raised production levels earlier this year to meet shortfalls from Iraq and Wednesday's meeting was arranged to address any changes that would affect the balance of supply and demand and hit prices. But looting, sabotage and terrorist attacks have delayed Iraq's full re-entry into the international oil market.

Iraq had a crude export capacity of 2bn b/d before the US-led invasion in March but is now producing about 900,000 b/d, 350,000 of which go to the domestic market.

Paul Horsnell, analyst at JP Morgan, said: "Opec appears to be in the box seat this time, and indeed ministers seem to have a good chance of getting through the rest of this year without having to make any significant adjustments."

A decision to keep quotas unchanged implies oil prices should remain relatively stable but some analysts warned it was no time for Opec to become complacent.

John Waterlow, at Wood Mackenzie, said: "They can sit back and be relatively satisfied with their performance because they have been successful in managing the market in recent years . . . but they really need to keep on top of what is happening in the future."

Several Opec members have faced domestic political problems which have hit production. Nigeria, Venezuela and Indonesia have been producing below their quota although Saudi Arabia, Iran and Algeria have made up the difference.

The American Petroleum Institute's data on Wednesday showing a 430,000 barrels fall in crude stocks nudged the IPE Brent crude price for September delivery up five cents to $28.15 and Nymex up eight cents to $30.32.(*)