Ministers of the Organization of the Petroleum Exporting Countries decided June 11 to maintain current oil production quota levels at 25.4 million b/d, but said they will hold another extraordinary meeting on July 31 to reassess the situation.
"Having reviewed the current oil market situation as well as supply-demand prospects for the second half of the year, the conference noted that stability had been maintained in the market following the decision taken by the conference in AprilUto reduce actual oil production to 25.4 million b/d, with prices remaining within agreed levels," ministers said in a statement.
Despite the fact that the market remains "well-supplied," ministers noted that oil prices have maintained an upward trend since their April meeting, attributing the trend to "the slower-than-anticipated recovery in Iraqi oil production, coupled with unusually low stock levels."
With Iraq's recovery still on hold and stock levels expected to rise during the third quarter, the ministers "decided to maintain currently agreed oil production levels, with strict compliance, and emphasized that continued vigilance in monitoring market developments is imperative over the coming period."
OPEC President Abdullah bin Hamad Al Attiyah underscored that point in a press conference following the meeting of ministers, saying, "we will discuss whether to continue or to cut (current oil) production.
"This is why we agreed to the (July 31) meeting."
Although Iraq was not represented at the June 11 meeting, the country clearly remains the point of greatest concern to ministers with questions raised over its actual and potential levels of oil production, the timing of its reentry into the export market, and its presence at future OPEC meetings—to say nothing of its membership in the organization it helped to found 40 years ago.
Iraqi expectations
Al Attiyah said OPEC expects Iraqi oil production to reach 2 million b/d by yearend, qualifying that as "production, not exports." At the same time, however, he acknowledged that getting information about the country's oil production is difficult. "We are waiting to get an accurate answer from Iraq," he said.
Earlier, Al Attiyah told OGJ Online that OPEC would be watching carefully as Iraq approached its prewar oil production level of 2.5 million b/d, saying that would be the occasion when "we will be talking seriously with the Iraqis."
He added, however, "It is difficult to predict when Iraq will come back to the market."
While frequently repeating that Iraq is a founding member of OPEC, he nonetheless suggested that it would not be represented at future OPEC meetings until "it has a government that is internationally recognized" by responsible organizations such as the United Nations.
Venezuelan Oil Minister Rafael Ramirez also underlined the point, telling journalists, "We cannot have relations with Iraq until there is an internationally recognized government, that is a consensus. This does not mean we do not want Iraq in the organization. We do want Iraq in OPEC and we think Iraq will want to stay in OPEC because they will need a reasonable price for oil."
New Iraqi government
Meanwhile, Al Attiyah intimated that informal talks with Iraqi oil officials might take place, saying, "We will contact Iraq and see what we can do for them." The US-appointed Iraqi oil minister Thamir Ghadhban has complained widely that OPEC Members have not called him or invited an Iraqi delegation to the organization's meetings.
On the sidelines of the June 11 meeting, however, one source close to the organization told OGJ Online that there remains considerable concern about the current Iraqi oil administration. "Ghadhban reports to Phillip Carroll, who reports to Paul Bremer, who reports to Donald Rumsfeld, who reports to George W. Bush. Is that an Iraqi oil ministry?"
So far, the US has no clear timetable for any transition in Baghdad to a full Iraqi government. The Bush administration is planning, in about 4 weeks' time, to install an Iraqi interim political council that can try to name candidates to organizations like OPEC.
But members of that council will not have diplomatic status, and a full Iraqi government may not be in place for a year or more. Al-Attiyah did not rule out recognition of an interim government, provided that it is internationally and legitimately recognized.
OPEC's recent production quota decision contained no surprises, and largely vindicates the wait-and-see position they adopted in April. With Iraqi oil production flat after the onset in March of the US-led war on Iraq, ministers decided in April to take up Baghdad's oil production to keep the market supplied and prices stable.
At the same time, however, they left themselves the option of using their most recent meeting as a clear and public sign of their willingness to cut back oil production if warranted by the situation in Iraq.
Underlining the organization's willingness to keep the door open for eventual increased output from Iraq—even as early as June 1, Al Attiyah said in April that "we decided to cut and may decide to cut more at Doha (OGJ Online, Apr. 24, 2003)."
With Baghdad's oil still nowhere in sight, however, the ministers can maintain the level they set in April, while continuing their vigil over Iraq until July 31—if not longer.
