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OPEC to Ask Oil Producers to Boost Output

Posted on: Wednesday, 16 June 2004, 06:00 CDT

JAKARTA, Indonesia - The Organization of Petroleum Exporting Countries will ask large non-OPEC oil producers to boost output in an attempt to blunt rising oil prices after a series of attacks on Iraqi oil facilities, the OPEC president Purnomo Yusgiantoro said Wednesday.

"I will send letters to some non-OPEC members, such as Russia, Mexico, Angola and Oman appealing them to increase their output," Purnomo told reporters.

Purnomo Yusgiantoro, who is also Indonesia's Mines and Energy Minister, said he was concerned oil prices could rise following sabotage on two oil pipelines in southern Iraq earlier this week.

Meanwhile in London, a senior Gulf source said OPEC was ready to cover any shortfall in world oil supplies caused by the attacks in Iraq that have shut down all Iraqi oil exports. "Our policy is that if there is a shortage we will supply the market," the official said.

The pipeline attacks and the subsequent closing of the Basra Oil Terminal threaten to take some 1.5 million barrels of oil a day off global markets, at least temporarily.

The latest attacks could also test OPEC's ability to keep supplies steady if Iraq can't export. Already, nearly all OPEC members are pumping near capacity to meet surging demand from Asia and the U.S. powered by a strong economic recovery.

Only Saudi Arabia could add more oil, about 1.4 million barrels a day, but that is less than what Iraq was adding to the market.

OPEC met the challenge last year when Iraq exports were halted by the U.S. invasion. But since then, world oil demand has grown at the fastest rate in nearly a quarter century, pushing oil producers to pump as much as they can just to keep up with demand.

Earlier this month, OPEC decided to increase its output ceiling to 25.5 million barrels a day starting July 1, and to 26 million in August, from 23.5 million currently.

Market reaction to the attacks has been muted. Crude futures closed lower Tuesday after briefly soaring on the news of the attacks, reflecting growing belief OPEC's pledge to increase supplies is already easing tight crude and gasoline inventories in the U.S. and elsewhere. U.S. data due later Wednesday is expected to show builds in crude and refined products stocks.

Oil has fallen nearly 10 percent since hitting 20-year highs above $42 a barrel after several terror attacks in Saudi Arabia.

Even if world oil markets are more assured, the attacks that has incapacitated oil exports threaten already tattered Iraqi stability, cutting off a sorely need needed source of revenue for the fledgling government set to take over control of the country June 30.

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