LONDON, May 12 - World oil prices rose to their highest levels in almost three weeks on Monday as expectation mounted that OPEC will agree to cut output when it meets in June. London benchmark Brent crude futures stood 43 cents higher by 1200 GMT to $25.53 a barrel, while U.S. light crude was 27 cents higher to $27.99 in electronic trade. "The market is moving on the perception of what OPEC's strategy will be when they meet on June 11 and so far all the indications are they will cut to bring the market back in balance," said Commerzbank analyst Steve Turner. "The second factor is the U.S. stocks, where so far inventory builds have failed to materialise," he added.
On Monday, OPEC kingpin Saudi Arabia, keeping to an April cartel pact to reduce crude supplies, told Western customers to expect up to a fifth less oil in June while Asian buyers will see a six to seven percent cut in supply. OPEC President Abdullah al-Attiyah said on Friday that the cartel needed to implement more supply cuts to make room for a possible resumption of Iraqi exports. Attiyah travelled to Moscow on Monday, following an OPEC invitation to producers outside the cartel to attend the June meeting. Russia is the world's leading non-OPEC oil exporter. Some analysts see prices rising further as an expected OPEC cut will coincide with U.S. oil stocks far below normal and a receeding prospect of a speedy return of Iraqi crude exports.
Iraq's oil industry head Thamir Ghadban said on Sunday Baghdad would have to push back its oil production target of 1.5 million barrels per day (bpd) by about a month after receiving a clearer picture of damage assessment to facilities. The sector, battered by 12 years of economic sanctions, is now suffering from looting and insecurity, he said. Ghadban had earlier said Iraq aimed to boost output to half its pre-war rate by end-May, up from 200,000 bpd now. "We shall meet that target at a later date -- perhaps by the end of June," Ghadban said. But demand too has suffered as Asian economies are ravaged by the deadly SARS epidemic. On Monday China's largest refiner Sinopec said it was cutting production by up to five percent as reduced travel due to SARS was hitting sales of oil products. But Commerzbank's Turner said the weak Asian situation was countered by robust demand in the United States. "This is reflected in the fact that we are not seeing the stock builds that we should be seeing at this time of the year," he said. U.S. crude stocks are now 12 percent under year-ago levels and the start of the summer driving season at the end of May will buoy gasoline buying and potentially eat further into already tight crude stocks.//