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OPEC convenes as Iran breakthrough emerges
By Jitendra Joshi
AFP
CARACAS
Petroleumworld.com 06 01 06The OPEC cartel was set to keep its oil production at a 25-year high as market tensions eased Wednesday following a historic offer by the United States to hold talks with Iran.
US Secretary of State Condoleezza Rice said that Washington was ready to join negotiations with its European allies on Iran's nuclear programme if the Islamic republic suspends all uranium enrichment.
It would be the most substantive US contact with Iran since they broke diplomatic ties 26 years ago.
The oil market has been convulsed for weeks by the threat of UN sanctions against Iran, which after Saudi Arabia is the second-biggest oil producer in the 11-nation Organization of the Petroleum Exporting Countries.
But the US offer helped to calm prices, along with clear signals from OPEC members that they will not cut output at talks in the Venezuelan capital Thursday.
New York's main contract, light sweet crude for delivery in July, shed 74 cents to close at 71.29 dollars a barrel after trading as low as 70.05. Brent futures in London also skidded lower.
OPEC has an official production quota of 28 million barrels per day, its highest level in a quarter century, but is under pressure from the Group of Seven club of rich nations to pump more to keep pace with booming demand.
However, many OPEC members argue that oil supplies are bountiful. They blame the tensions over Iran and unrest in Nigeria, Africa's biggest crude producer, for sparking a speculative frenzy on the markets.
Venezuela, OPEC's only Latin American member, had been pushing for the cartel to reduce its output, but that idea has received no support from the Gulf states that dominate the cartel.
Venezuelan energy minister Rafael Ramirez acknowledged that it was "too early" for OPEC to cut output now, but said the group should consider a reduction when it next meets in September.
Qatar's Energy Minister Abdullah bin Hamad al-Attiyah was more circumspect about prospects for a cut at OPEC's next meeting, in Vienna on September 11.
"We'll see. We are very dynamic. We don't love cuts. No one loves cuts," he told reporters.
For now, he said, there was "no justification" for a cut. That could change "if the market dramatically changes", al-Attiyah said.
OPEC's current president, Nigerian oil minister Edmund Daukoru, said the world oil market is "well supplied." Like other OPEC delegates, he blamed high prices on refining problems in consuming nations and on political tensions.
OPEC's member countries -- Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela -- supply 40 percent of the world's oil production and half of its exports.
A cut in production by the cartel would drive prices still higher, so earning its member states more petrodollars. But it could also kill economic growth in voracious oil consumers such as the United States.
In any case, analysts say that OPEC members with the exception of Saudi Arabia are pumping all the crude they can. Several are quietly ignoring the cartel's own production caps.
"I don't believe there is a shortage of oil at all," al-Attiyah said, arguing that prices have been driven up by geopolitical tensions and by speculation.
OPEC members insist it is up to the United States and other consumer nations to boost their refining capacity to process more crude into gasoline, diesel and heating oil.
Rocketing demand for energy from fast-growing China and India has also stoked the oil market's startling rally.
AFP 31 2142 GMT 05 06
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