VIENNA, April 24 - OPEC oil producers on Thursday readied production cuts to ward off a supply glut and stop prices sinking before Iraq restores post-war exports. Saudi Oil Minister Ali al-Naimi told OPEC would probably agree simply to remove excess output pumped above existing quota limits, rather than cut quotas. "We will probably take very serious action at this meeting," on "reducing that level" of overproduction, Naimi said ahead of a 1200 GMT meeting. "We are going to reduce oversupply, we have to," added Venezuelan Oil Minister Rafael Ramirez. The Organisation of the Petroleum Exporting Countries in March sanctioned those with spare capacity to deliver extra supplies to prevent the U.S. war on Iraq causing an oil shock. It estimates the excess at 1.6 million barrels a day above an official limit of 24.5 million bpd with most of the additional crude coming from Saudi.
The increased volumes have put prices under pressure after the short war left Iraqi oil facilities with only minor damage. U.S. crude added a cent in Thursday trade to $26.66 a barrel after a five percent slump on Wednesday that valued an OPEC index of crudes at just over $25. Naimi said producers were determined to defend crude at $25-a-barrel and urged the group to keep that target for the next decade. "The $25 price is uppermost in our minds and we are determined to keep it whatever it takes," he said.
The Saudi oil minister, who may be replaced soon in a cabinet reshuffle, said OPEC needed crude that high to provide investment to bring onstream new reserves to cater for rising world oil demand in years to come. "We'll be lucky in the next 10 years to have enough investment to meet demand, that's why we need to keep the $25 target -- not lower, and not higher because then you impinge on demand," he said. For now, producers must calculate how far to cut back to prevent inventories building too quickly before the return of Iraqi exports. World demand slows during the second quarter and ministers will want to prevent stocks rising by more than two million barrels a day on the 78 million bpd world market. With supply arrangements already in place for May, their reductions may not be felt until June. "In reality they can't cut until June," said Gary Ross of New York's PIRA Energy. "You have to expect them to remove up to a million barrels a day in June."//