EU puts pressure on OPEC to increase crude oil production

THE EU is putting pressure on OPEC to increase crude oil production in order to bring prices down from $28 a barrel to around $20 a barrel.

European energy commissioner Loyola de Palacio said Europe would like crude oil prices to stabilise around $20 per barrel and hopes to get commitments in that direction from OPEC countries at the upcoming international energy forum in Japan. “What we are interested in is for the price of a barrel to stabilise around 20 dollars,” de Palacio told a press briefing yesterday.

“I hope the meeting between producers and consumers in Osaka next week will allow us to obtain certain guarantees from OPEC countries,” in particular on continued supplies, in case Iraq no longer supplies oil to world markets, she added.

OPEC countries are to meet next Thursday in Osaka, Japan, to discuss oil prices against a backdrop of possible US military strikes against Iraq. Countries such as Saudi Arabia, and Russia, which is not an OPEC member, have very, very large quantities available and could increase their production very quickly, de Palacio noted.

US crude oil gave up a dollar of its ‘war premium’ last night on traders' perception that US President George Bush's address to the United Nations General Assembly appeared to defer, for now, military action against Iraq. Crude for October delivery on the New York Mercantile Exchange fell to $28.70 a barrel, down $1.07, on heavy selling led by speculative hedge funds that have driven prices up in recent weeks, traders said.

Oil prices have accumulated a war premium to trade near 19-month highs above $30 a barrel on fears that the US might strike Iraq. The US accuses Iraq of making weapons of mass destruction and backing terrorism.

Bush told the UN General Assembly yesterday that ‘action will be unavoidable’ against Iraq, unless the United Nations enforced resolutions requiring Baghdad to disarm.

“Bush seems to be saying UN resolutions have to be toughened first against Saddam...if that fails, then the military option becomes key,” said a NYMEX floor trader.

Bush laid out a harsh indictment of Iraqi President Saddam Hussein, saying he has flouted a decade of post-Gulf War demands from the UN by developing weapons of mass destruction.