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Oil slips in Asia as OPEC pressed on output

SINGAPORE: Crude prices in Asia weakened on Thursday as major oil consumer the United States stepped up pressure on producers to relax export curbs soon. May New York Mercantile Exchange (Nymex) crude futures traded at $27.30 by 0740 GMT, falling 16 cents from the settlement in New York, where the contract had ended 35 cents lower.

The United States, which consumes a fifth of the world's oil, on Wednesday approved legislation reaffirming President Bill Clinton's authority to cut off U.S. aid and arms sales to oil cartel OPEC and nations that fix oil prices.

The legislation would not give the president new authority to punish OPEC, but would encourage him to use his existing powers to confront the producer group over its output policies by reducing or terminating U.S. aid and arms sales.

"We're putting pressure on the OPEC nations," said Rep. Benjamin Gilman, the New York Republican who sponsored the legislation.

OPEC meets on March 27 to decide output after the end March expiry of an export curb deal. The deal, agreed by OPEC and some non-OPEC producers last year, had eroded stocks and trebled prices in a year, prompting consumers to call for an output hike.

U.S. crude prices hit a nine-year peak of $34.13 per barrel on March 7 on the export curbs, but then dropped 20 percent on expectations that producers would loosen the taps soon.

OMAN, INDONESIA SEEK OUTPUT INCREASE

Non-OPEC oil producer Oman, which participated in the export cut deal, said on Thursday it hoped OPEC would raise output.

"I hope the outcome of the meeting will be to increase production, but I don't know by how much," Omani oil minister Muhammed bin Hamed al-Ruhmy said during a visit to Bangkok.

"No one in OPEC or outside OPEC would like a very high oil price. Our concern is yours in the consumer countries," he said.

Indonesia, the only Asian OPEC member, said it wants its quota back at the past level of 1.28 million barrels per day (bpd).

"Indonesia will be happy to get its quota back to the pre-cut level of 1.28 million bpd if OPEC agrees to add limited extra oil during the conference," said oil minister Susilo Bambang Yudhoyono.

Indonesia committed to cut 93,000 bpd to 1.187 million bpd as part of the supply cut deal, but industry sources say it has consistently exceeded its quota, producing 1.30 million bpd of crude in February.

Yudhoyono has said Indonesia would accept an OPEC output rise of one million bpd, but would resist attempts to raise production by two million bpd on grounds that it would depress prices.

In Washington, the head of the U.S. government's Energy Information Administration said OPEC needed to boost production by three million bpd on top of an official limit of 23 million bpd, excluding sanctions-bound Iraq.

It said a million of that was already being pumped in the form of leakage over official quotas.

Leading producers, including Saudi Arabia, were believed to favour extra OPEC supply of about 1.5 million bpd. Price hawk Iran prefers less than a million bpd while Libya and Algeria want to postpone any increase for at least three months.

OPEC now looks likely to steer clear of any effort to legitimise leakage above current supply quotas as part of a new agreement to raise output.

The leakage was estimated at some 1.2 million bpd above official quotas.-Reuters