The price of oil eased gently here on Monday despite market expectations of another cut in output from the Organisation of Petroleum Exporting Countries (OPEC).
A barrel of Brent North Sea crude for April delivery was selling for $26.18 a barrel, down from $26.33 at Friday's closing level. Brent had fallen briefly below $26 a barrel in morning trade.
In New York, a barrel of light sweet crude for April delivery was unchanged from the previous close at $28.01. Several ministers from the 11 OPEC countries reiterated over the weekend that they wanted the group to agree another output cut at a meeting in Vienna on Friday.
At OPEC's last ministerial meeting in January, ministers agreed a production squeeze of 1.5 million barrels per day -- about five percent of total output.
"People have got it in their minds that OPEC will cut between 500,000 to one million barrels (per day)," ABN Amro trader Terry Wilson said.
"Anything above that is obviously going to effect the market because I think that sort of figure is probably already written into the price."
But the impact of OPEC's production policy on the market was called into question on Monday by a report in the authoritative Middle East Economic Survey (MEES), which said that several members had exceeded their quotas in February.
MEES said that OPEC countries overproduced by 450,000 barrels per day (bpd) in February, meaning that effectively one-third of OPEC's output cut commitments were not respected. Iran was the biggest transgressor, pumping 192,000 barrels a day over its quotas, MEES said.
Yet Iran is one of the strongest proponents of further OPEC cutbacks, with Oil Minister Bijan Namdar-Zanganeh warning on Sunday that failure to do so would lead to a supply glut.
"If OPEC does not cut back its production at Friday's meeting, the excess production on the market will cause prices to plunge," he told state television in Tehran.
Qatar's Energy Minister Abdullah bin Hamad al-Attiya meanwhile said he expects a market surplus of two to three million barrels per day, and that OPEC should move to reverse the trend.
"I can not give a precise figure, but the cut will be in line with the market situation," Attiyah told the al Hayat newspaper.
Analysts said OPEC would almost certainly cut production, but the volume of the cut remains a mystery, with most estimates putting it at between 500,000 and one million barrels a day.
"It is hard to find anyone opposed to the idea of a cut," said GNI brokerage analyst Lawrence Eagles. "The question is the size."
MEES said OPEC would have to take into account both over-production and fitful Iraqi supply when it decides on the cutback. Iraqi export volumes have been variable ever since Baghdad became embroiled late last year in a row with the United Nations over the oil-for-food programme.
"While Iraqi production is widely expected to continue rising slowly, nobody knows what direction the review of sanctions within the UN will take and how Baghdad will react," it said.—AFP.
©--Agence France Presse 2001.
© 2001 Mena Report (www.menareport.com)