Iraqi oil supplies could take 12 months to resume fully

Oil prices have jumped to levels not seen since the end of the war in Iraq following Opec's decision to meet again next month and consider cutting quotas.

The oil cartel decided on Wednesday to retain current production levels.

But Opec president and Qatar oil minister Abdullah bin Hamad al-Attiyah said they would meet again on 31 July to assess the impact of Iraq's return to the market.

"Because of the uncertainty at the moment on the world market we want to meet as often as possible," he said.

Meanwhile the US Energy Information Administration (EIA) reported another decline in already low fuel stocks, prompting an immediate leap in crude oil prices.

Iraq effect

US light crude jumped 63 cents to $32.36 on the news, after hitting a peak of $32.50 - the highest level in 12 weeks and nearly 35% higher than this time last year.

They more often they [Opec] meet, I think, the easier it is for them to behave like gentleman Barbara Shook, Energy Intelligence Group

The EIA said US crude oil stocks fell by 4.6 million barrels last week, against traders' expectations of a rise, falling to levels 12% below last year.

Oil prices continued to hover above the $32 per barrel level on Thursday morning but some dealers suggested Opec's decision indicated a softening of prices once Iraqi oil returns to the market.

Iraq, which stopped its oil exports in March, said earlier this week it hopes to produce 1.5 million barrels per day (bpd) by the end of month, of which one million would be exported.

However, the interim head of the Iraqi oil ministry, Thamir Ghadban, said production would not return to pre-war levels for at least a year.

Behaving like gentleman

Dealers welcomed Opec's decision to meet again next month.

Barbara Shook from the Energy Intelligence Group said it was "probably the wisest decision in the short term", but predicted there would be no cut if Iraq's oil sector is as badly damaged as has been reported.

Looting and damage to equipment in key oil fields has prompted suggestions that Iraqi exports will remain well below pre-war levels for some time.

"The situation appears to be very, very bad. I wouldn't expect any further cut in July," said Ms Shook.

But she added that regular Opec meetings ensured prices did not go too far above the cartel's goal of between $22 and $28 per barrel.

"Opec accords are generally gentleman agreements.