OPEC Calls Emergency Meeting

The Organization of the Petroleum Exporting Countries has decided to hold a special meeting this month to consider a production cut aimed at supporting oil prices, which have fallen more than 26% in less than a month.

“The market is facing a glut, not a shortage,” OPEC President Abdullah ibn Hamad al Attiyah, who also is Qatar’s oil minister, said in Paris on Monday as he announced the April 24 meeting.

Oil prices rallied briefly on the news, but ended the day down 66 cents at $27.96 a barrel in New York trading. After peaking at $37.83 a barrel on March 12, crude prices have fallen sharply as traders bet that the U.S. would triumph quickly in its standoff with Iraq.

Oil output from OPEC rose in March to the highest level in 1 1/2 years, as production increases in Venezuela and Saudi Arabia made up for a drop in supplies from Iraq, a Bloomberg survey showed. Reflecting the increase, U.S. inventories rose by almost 7 million barrels, or 2.5%, in the latest week.

Most OPEC members are ignoring their output quotas, designed to keep the group’s benchmark price between $22 and $28 a barrel. OPEC exceeded its target by 1.57 million barrels a day, or 6.4%, in March. The OPEC president said members are seeking prices at $25 a barrel.

Saudi Arabia, OPEC’s biggest producer and the world’s top oil exporter, in March pumped 9.2 million barrels a day, the highest in at least 13 years, according to the Bloomberg survey.

An end to the conflict in Iraq may cause prices to drop below $22 a barrel, the lower end of OPEC’s target range, as world output climbs, said Ali Rodriguez, head of Venezuela’s state oil company and OPEC’s previous secretary-general.

“Iraq could be tempted to boost its production quickly,” he told reporters in Caracas. “Prices could fall very abruptly, but I don’t see a permanent price collapse.”

Compounding the pressure on prices is a recovery in production from Venezuela after a nationwide strike in December and the return of oil production from Nigeria after shutdowns caused by an outbreak of violence last month in the country’s main oil-producing region.

“There is a possible need for OPEC to start cutting back on some of its overproduction,” said Julian Lee, an analyst at the London-based Center for Global Energy Studies. “The impact of the [Iraq] conflict on oil seems to have been relatively minor, and OPEC needs to respond to that.”

“We are seeing the oil price drop dramatically,” the OPEC president said. “The problem is to manage, rather than to be late” in reacting to that decline.

OPEC, which pumps a third of the world’s oil, had planned a meeting June 11 in Doha, Qatar.