Oil prices hit fresh 12-week highs last night as members of the Organisation of Petroleum Exporting Countries (OPEC) gathered for a meeting tomorrow against a backdrop of tight global supply.
US crude oil in New York rose 17 US cents to $31.45 a barrel, settling at its highest price since March 18th after surging 20 per cent in barely a month. Brent crude in London rose nine US cents to $27.87 a barrel.
OPEC ministers meeting in the Middle East emirate of Qatar will debate whether they need to cut production to accommodate the expected resumption of Iraq's oil exports this month. With prices nearly 30 per cent higher than a year ago and Iraq's exports expected to stay below pre-war limits for up to a year, some OPEC ministers have said there seems to be no need for the group to rein in supply.
OPEC, which controls around half the world's crude exports, aims to keep prices in a range of $22-$28 a barrel for its basket of crude oils. The basket was last valued at $26.77.
"There is no urgent need for the organisation to modify its output," Mr Frederic Lasserre of SG Securities said in a report.
"Iraq is still not in a position to harm the balance of supply and demand. Inventories are rising in line with the season but in absolute terms remain very low."
After falling heavily from 12-year highs near $40 when Middle East oil facilities escaped feared damage from the US-led invasion of Iraq, oil prices have now risen back to levels that can further undermine already weak economic growth.
OPEC would use this week's meeting to press independent exporters such as Russia, Norway and Mexico to back any supply cuts needed later this year, OPEC's president, Mr Abdullah al-Attiyah of Qatar, said. Iraq this month will sell its first crude since the US-led invasion in mid-March, tendering 10 million barrels of stored crude oil, allowing it to deliver an average of about 750,000 bpd during the second half of June.
Sabotage at oil facilities since the war will keep exports down to one million bpd in July, Iraq's de facto oil minister Mr Thamir Ghadhban said yesterday. Before the war, Iraq was producing about 2.5 million bpd and exporting two million bpd.
US fuel inventories have failed to rebuild after supply disruptions from a strike in Venezuela and ethnic strife in Nigeria drew down supplies earlier this year. US crude stocks remain in an 11 per cent deficit versus last year, while gasoline is down 5 per cent. The next US government supply data will be released tomorrow.
