VIENNA -(Dow Jones)- Hunt Oil Co.'s agreement with Iraq's semiautonomous Kurdish region to explore for oil is illegal, Iraq's oil minister Hussein al- Shahristani said Monday, in his first public reaction to the deal announced over the weekend.
"Any oil deal has no standing as far as the government of Iraq is concerned," said al-Shahristani. "All these contracts have to be approved by the Federal Authority before they are legal. This (contract) was not presented for approval. It has no standing."
His comments, delivered as he arrived for an OPEC ministers meeting in the Austrian capital, underscore the central government's view that exploration contracts with foreign companies should be signed only after the adoption of a new national oil law.
The deal is one of several the Kurds have signed with foreign oil companies in the past few years and the first since the Kurds put their own oil law into effect in August.
These deals have angered Baghdad, but the Kurdish region appears determined to advance oil exploration in the Denmark-sized area they govern in northern Iraq, as Iraq's long-delayed federal oil law remains hobbled by disagreements.
Referring to current OPEC policy, Al-Shahristani said there doesn't seem to be a shortage of crude oil supply now, noting that he expected high oil prices to fall.
"But we'll be looking carefully at the predictions that our secretariat produces for the fourth quarter and if there's a need to supply the world market with what it want then we'll consider," he said.
"The dollar has significantly devalued in the past few months and that has really affected the income of a number of countries," he added.
OPEC ministers will hold their first meeting in six months on Tuesday against a backdrop of turmoil in credit markets and broader concerns about the state of the U.S. economy. Thus far, they've given little indication of a desire to raise output now, though some analysts believe they may communicate a desire to lift oil production later this year.
OPEC - excluding Iraq and Angola - agreed to cut its output by 1.7 million barrels a day in two tranches commencing Nov. 1 last year to head off the prospect of oil prices falling sustainably below $50 a barrel as oil stockpiles swelled on thinning demand caused in part by a mild winter. Though benchmark prices were lower Monday, they are sharply higher than when OPEC announced those cuts, with Brent futures trading at $74.05 a barrel and New York futures trading at $75.81.
New York crude futures hit a record intraday high of $78.77 in early August.
"The price isn't at its typical value now and we expect it to go down," said al-Shahristani.
"OPEC will always be available to increase its production if there's demand for it."