28/07/2003 13:39
The failure to rebuild Iraq's oil industry will probably save other OPEC countries from painful production cuts this year, confounding earlier fears of a crisis in the cartel from a resurgent Baghdad.
But oil market analysts said Iraq's absence would give only temporary respite for the 11-member group, whose high price policy was eating away at its share of the world oil market and hurting economic growth.
Ministers of the Middle East-dominated group, which controls half of the world's exported oil, are due to meet on Thursday for an extraordinary meeting in Vienna.
OPEC President Abdullah al-Attiyah of Qatar has said there is no need to change the current ceiling of 25.4 million barrels per day (bpd) for 10 members excluding Iraq while prices are near the top of OPEC's target range.
"OPEC appears to be very much in the box seat at 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," said Paul Horsnell of J.P. Morgan.
The cartel's market management, focused on keeping supply tight enough to keep prices at $22-$28 a barrel, has rewarded exporters with windfall profits since the curbs began in 1999.
But consuming countries, keen to bring energy costs down, say the four-year boom has damaged economic growth and steadily eroded OPEC's market share in favour of rivals such as Russia.
The Organisation of the Petroleum Exporting Countries is now pumping two million bpd less than it was five years ago, while world demand has grown by four million bpd in that period.
Iraq took the brunt of OPEC's market share loss this year, its oilfields crippled by the U.S.-led war and its aftermath, but the decline appears likely to accelerate across the whole group next year as Iraq recovers.
OPEC CALL FALLS
Despite strong growth forecast for world oil demand next year, the call for OPEC crude will slide again by 700,000 bpd to 24.6 million bpd, according to the International Energy Agency.
OPEC seems ready to pay the price of further output cuts to maximise revenue, at least for now.
The cartel's optimists think the market share pendulum will swing back in OPEC's favour even at $25 a barrel. They dismiss the possibility of a re-run of the 1986 price crash, when OPEC abandoned its price target to reclaim markets.
"The important thing is to survive the next two or three years," Saudi Oil Minister Ali al-Naimi said at a press conference in April.
"In five or seven years, I believe this whole question of quotas is going to be academic. Demand is going to rise and people are going to struggle to get the necessary investments to provide the necessary supplies," Naimi said.
Adam Sieminski of Deutsche Bank disagrees.
"People are beginning to realise that demand is lagging," he said. "OPEC continues to cut production and lose market share, and at some point the whole thing will come down like a pack of cards."
But oil market analysts said Iraq's absence would give only temporary respite for the 11-member group, whose high price policy was eating away at its share of the world oil market and hurting economic growth.
Ministers of the Middle East-dominated group, which controls half of the world's exported oil, are due to meet on Thursday for an extraordinary meeting in Vienna.
OPEC President Abdullah al-Attiyah of Qatar has said there is no need to change the current ceiling of 25.4 million barrels per day (bpd) for 10 members excluding Iraq while prices are near the top of OPEC's target range.
"OPEC appears to be very much in the box seat at 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," said Paul Horsnell of J.P. Morgan.
The cartel's market management, focused on keeping supply tight enough to keep prices at $22-$28 a barrel, has rewarded exporters with windfall profits since the curbs began in 1999.
But consuming countries, keen to bring energy costs down, say the four-year boom has damaged economic growth and steadily eroded OPEC's market share in favour of rivals such as Russia.
The Organisation of the Petroleum Exporting Countries is now pumping two million bpd less than it was five years ago, while world demand has grown by four million bpd in that period.
Iraq took the brunt of OPEC's market share loss this year, its oilfields crippled by the U.S.-led war and its aftermath, but the decline appears likely to accelerate across the whole group next year as Iraq recovers.
OPEC CALL FALLS
Despite strong growth forecast for world oil demand next year, the call for OPEC crude will slide again by 700,000 bpd to 24.6 million bpd, according to the International Energy Agency.
OPEC seems ready to pay the price of further output cuts to maximise revenue, at least for now.
The cartel's optimists think the market share pendulum will swing back in OPEC's favour even at $25 a barrel. They dismiss the possibility of a re-run of the 1986 price crash, when OPEC abandoned its price target to reclaim markets.
"The important thing is to survive the next two or three years," Saudi Oil Minister Ali al-Naimi said at a press conference in April.
"In five or seven years, I believe this whole question of quotas is going to be academic. Demand is going to rise and people are going to struggle to get the necessary investments to provide the necessary supplies," Naimi said.
Adam Sieminski of Deutsche Bank disagrees.
"People are beginning to realise that demand is lagging," he said. "OPEC continues to cut production and lose market share, and at some point the whole thing will come down like a pack of cards."
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