Oil prices drop as think-tank urges OPEC to raise output

Oil prices dropped sharply after a leading energy think-tank called on the OPEC to raise output when it meets to help build low stocks. The price of benchmark Brent North Sea crude oil for September delivery fell 56 cents per barrel to $ 28.37 in late trading. New York's light sweet crude reference August contract slid 54 cents to $ 31.42 in early deals.
Traders were looking ahead to a meeting of the Organisation of Petroleum Exporting Countries (OPEC) in Vienna on July 31.
"People are worried that OPEC might increase output at their meeting next week," said Prudential Bache broker Christopher Bellew. "Until now, people were waiting for OPEC to maintain output."

Speculation over the meeting intensified after the London-based Centre for Global Energy Studies (CGES) urged the cartel to raise output to help rein in prices on world markets still deprived of Iraqi oil. Prices will remain high for the rest of the year unless Saudi Arabia pumps more oil, it warned. But Indonesia's energy minister said he for one would be urging the cartel to keep its production quotas unchanged at the gathering.
"OPEC should better maintain its production quota considering that present conditions are quite good," Purnomo Yusgiantoro said. The minister attributed current high prices to uncertainty about when Iraqi oil exports will resume.
"Once there is certainty on when Iraqi oil production enters the market, it is very likely that crude prices will then drop," Yusgiantoro said.

But the restoration of Iraq's pre-war production of 2.5 mm bpd "now looks remote," said the GCES. "Production at this level was barely sustainable before the conflict and the oilfield rehabilitation required to get production back up to this level will take many months."
Oil production in Iraq will, at best, rise to around 1.5 mm bpd by the end of 2003, supporting exports from Iraq of around 1.0 mm bpd, it forecast. With worries about low inventories propping up prices, traders were waiting anxiously for weekly stock figures due from the US Department of Energy.