Mindful of Iraqi exports, OPEC agrees to keep output unchanged

VIENNA, Austria -- OPEC members have agreed to hold oil output steady and to wait until September before making changes to production quotas, the cartel said Thursday.

In a widely expected decision, the Organization of Petroleum Exporting Countries chose not to lower the daily production cap of 25.4 million barrels, despite earlier fears that a revival of Iraqi crude exports might upset the market and erode prices.

Chronic security problems have delayed Iraq's return to the market, and with prices hovering near the top of OPEC's targeted price range, the group decided its best policy was to continue pumping at current levels.

"The market is stable and well-supplied," with prices fluctuating at a comfortable level, OPEC said in a communique.

However, the group warned that demand growth during the last three months of the year and in 2004 might not keep pace with supplies. The cartel suggested it might decide to cut output at its next meeting, on Sept. 24, or soon after.

"We expect in September to be more clear about the Iraqi situation," OPEC President Abdullah bin Hamad Al-Attiyah told a news conference at cartel headquarters in Vienna.

OPEC's decision Thursday would have little effect on consumer prices for gasoline and other refined products, said Edward Morse of Hess Energy Trading Co. in New York.

OPEC supplies about a third of the world's crude. Iraq is one of its 11 members, but hasn't participated in production quotas since 1990.

OPEC delegates met earlier in the day with representatives from Russia, Angola, Oman, Egypt and Syria. The cartel received assurances from the five independent producers that they would try to restrain themselves from ramping up production to take advantage of current high prices.

The price for OPEC's benchmark blend of crudes is almost $28 a barrel -- the upper limit of its targeted range.

Oil futures edged upward after the announcement, then fell back. September contracts of U.S. light, sweet crude were trading 12 cents lower at $30.56 a barrel on the New York Mercantile Exchange.

OPEC decided in June to meet this month, anticipating that Iraq would return quickly to the oil market in the wake of the U.S.-British invasion that toppled former President Saddam Hussein. But widespread looting and apparent sabotage have hindered Iraq's ability to increase exports, and other OPEC members saw little reason to change their output now.

Although no Iraqi delegation attended the meeting, uncertainty about Iraq's export potential loomed like "a ghost at OPEC's banquet," said Peter Gignoux, head of the petroleum desk at Salomon Smith Barney in London.

Iraq is seeking to restore output to the 2.1 million barrels a day it was pumping before the war. Falah Aljibury, an Iraqi-born energy consultant based in Alamo, Calif., estimated that Iraq now pumps about 1.6 million barrels a day, but he said no more than half is available for export.

Accommodating Iraq's rising production is likely to become a bigger issue for OPEC when it meets again in September. Some officials expect that meeting to be more contentious than Thursday's relatively brief session.