ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Friday, November 29, 1996 TAG: 9611290121
SECTION: BUSINESS PAGE: B10 EDITION: METRO
DATELINE: VIENNA
SOURCE: BLOOMBERG BUSINESS NEWS
THOUGH ITS MEMBERS exceed the production quotas, world demand is expected to keep prices about the same for a while.
OPEC ministers, as expected, said they won't change the group's oil- production target for now, because a 30 percent jump in prices has made it easier to ignore their longtime failure to curb supply.
With the runup in prices and demand for oil remaining strong, the Organization of Petroleum Exporting Countries has been pumping a lot more than its self-imposed quota, as cash-strapped members produce crude to raise revenue.
OPEC agreed Thursday to keep its production target unchanged at 25.033 million barrels of oil a day, although its 11 member nations actually pump about 1 million barrels a day more than that, and have exceeded the quota for years.
``It's just a signal to the market that OPEC can't control its production,'' said Leo Drollas, senior economist at the Centre for Global Energy Studies. ``But right now, it doesn't matter.''
World oil demand is expected to remain strong enough to soak up the extra output, at least until the second quarter, ministers and analysts said. After that, supplies outside OPEC are expected to rise faster than demand, and that could push prices down.
Extra output from OPEC cheaters - notably Venezuela and Nigeria, according to analysts - hasn't hurt prices, which remain near six-year highs. That's generated $30 billion in extra revenue to OPEC's oil-rich members, who have taken in $154 billion in 1996.
Rilwanu Lukman, OPEC's secretary-general, said the ministers expect crude oil prices to remain ``firm'' for the next three to six months. Lukman said demand is strong enough to keep prices from falling, even if Iraq resumes exports early next year.
Some analysts aren't so sure. Leslie Nicholas at GNI Ltd. in London, said Brent crude futures could be $20 or less by the end of the first quarter as supplies start rising and winter demand eases.
``Come the next meeting, they will have oversupply problems,'' Nicholas said.
Compounding the problem will be Iraq, which may be close to resuming exports that have been banned by the United Nations in 1990. If Iraq starts pumping oil next month, as some expect, crude prices will fall by about $1 a barrel, Nicholas said.
On Monday, Iraq withdrew final objections that had delayed a U.N. plan to allow Iraq to sell $2 billion worth of oil to raise much-needed humanitarian aid.
The U.N. on Wednesday approved a method of pricing the Iraqi crude oil when it's sold, which was the last organizational detail before final approval is sought from the Security Council.
That could pave the way for 500,000 barrels a day or more of new production, at a time when analysts say demand for crude is strong because of low inventories and winter consumption.
Still, OPEC ministers remain cautious enough about the market that they've decided to review their production target again by midyear. They'll next meet in Vienna on June 25, 1997.
``We're going to have to wait and see the market, and the possibility that Iraq is increasing its production over the coming midyear,'' Osama A. Al-Hiti, the former Iraqi oil minister heading his nation's OPEC delegation, said Thursday before the meeting.
LENGTH: Medium: 69 linesby CNB