NEW YORK, May 10: Oil prices rose nearly 3 per cent on Friday as Opec’s president said the producer cartel needed to cut back more supply next month to make room for a possible resumption of Iraqi exports.
The United States and Britain on Friday presented their case to the UN Security Council for ending 12 years of UN sanctions against Iraq, potentially paving the way for Iraqi supply to return next month.
US crude futures in New York rose 74 cents to $27.72 per barrel, hitting their highest level for two weeks, after gaining 5 per cent in the last two sessions. In London, benchmark Brent crude rose 45 cents to $25.10.
In a boon to a weak world economy, oil prices have fallen by 30 per cent in the last two months as Middle East oil facilities escaped severe damage from the war in Iraq, and OPEC pumped up production to offset the loss of Iraqi exports.
The Organisation of the Petroleum Exporting Countries, which controls about half of world oil exports, surprised traders last month by cutting back less than expected on pre-war supplies.
Opec President Abdullah al-Attiyah said in an interview published on Friday the cartel would have to implement new output cuts at its upcoming June 11 meeting to bolster prices.
There is too much oil on the market and that is having a bad influence on prices ... Opec must implement new reductions in its production, Attiyah said in an interview with French daily Le Monde.
While increased supplies from Opec have helped replenish low US fuel stocks, crude and gasoline inventories are still below last year’s levels heading into summer when vacation driving pushes up consumption.
Analysts warn that further supply increases will be limited by the lack of imports from Iraq, which has not shipped oil since mid-March. While Iraq’s oil production is recovering, no entity in Baghdad has the legal authority to export the oil.
The United States and Britain want a new resolution by June 3, when the existing humanitarian oil-for-food program, which gives the United Nations control over the oil revenues, needs to be renewed.
The Bush administration is counting on approval from Russia, France, China and Germany, who led the bloc of countries opposed to the war in the 15-member council, with officials saying there was little enthusiasm for another bruising fight.
Oil market analysts expect Brent prices to reach $23.23 per barrel in the fourth quarter and average $21.39 next year, according to a poll of analysts published by Reuters on Friday.—Reuters