NEW YORK, Jan. 7 (UPI) -- Crude prices on the New York Mercantile Exchange beat a hasty retreat Tuesday amid reports that OPEC was set to increase its exports by up to 2 million barrels per day to offset the loss of production caused by a nagging strike in Venezuela.

     OPEC was working this week to set up a possible meeting as early as this weekend to discuss raising production quotas, a move that could seriously undermine the sturdy moorings crude prices have enjoyed in the past month during Venezuela's strife and the continuing potential for a war in the Persian Gulf region.

     February NYMEX crude tumbled $1.02 Tuesday to $31.08 while February gasoline slipped 4.02 cents to 84.18 cents per gallon, and February heating oil fell 3.91 cents to 84.88 cents per gallon. Crude had slipped 98 cents on Monday after OPEC officials began publicly discussing putting more oil on the market.

     Some analysts have predicted that the outbreak of a war in Iraq at the same time Venezuela's oil production was seriously curtailed could cause a major spike in crude prices; however, U.S. government analysts noted Tuesday that OPEC had the capability to ramp-up production quickly and by significant amounts.

     "According to fourth-quarter 2002 estimates, the world (excluding Iraq) holds as much as 4.8 million barrels per day of excess oil production capacity that could be brought online," the Energy Information Administration said. "Nearly all of this 'excess capacity' is located in OPEC member countries."

     OPEC increased its quota by 1.3 million barrels to 23 million barrels per day beginning Jan. 1, and another boost could leave OPEC vulnerable to being caught on the proverbial limb in the form of a saturated market if the political situation in Venezuela is sorted out and the state oil company, PDVSA, resumes full production

     An increase in OPEC production would not be an arbitrary decision on the part of the cartel. OPEC has a mechanism in place that is based on an average price of $22-$28 per barrel for a "basket" of various crude varieties produced by member nations.

     If the price slips below the $22-$28 price band for 20 consecutive days, production is reduced accordingly. If the price goes above the band, production is increased. OPEC said its basket price topped $30 per barrel last week and was $30.71 on Monday.      -0-      (Reported by Hil Anderson, UPI Chief Energy Correspondent)

www.gulf-daily-news.com LONDON:

Oil prices fell heavily yesterday as leading Opec power Saudi Arabia pushed the cartel for a big two-million-barrel-a-day output increase, nine per cent, to fill a gap left by a five-week-old strike in Venezuela.

US light crude slumped $1.02 to $31.08 a barrel, extending Monday's 98-cent loss. London Brent blend shed 85 cents to trade at $29.35 a barrel.

Leading Opec power Saudi Arabia wants to add between 1.5-2m barrels daily to supplies to stop high prices hurting world economic growth, an Opec delegate said.

Dealers said the additional volumes proposed by Saudi were larger than expected. They would come on top of official limits now of 23m bpd.

But several officials in the cartel expressed scepticism over whether the group would do that much, saying the top end of the Saudi plan looked like a negotiating position.

Most expect an agreement in the range 1-1.5m bpd, the volume Kuwait's oil minister, Sheikh Ahmad Al Fahd Al Sabah, says is favoured.

The group is considering an emergency meeting on January 12 to finalise the deal. Otherwise it could seal the deal by telephone.

Oil has retreated from a two-year peak of $33.65 a barrel for US crude since the end of December when it was first revealed that Opec was discussing a substantial output increase.

The group wants to plug the loss from Venezuela, its third largest member, and restrain prices in its favoured $22-$28 a barrel range.

It is also aware that the growing threat of a US assault against oil producer Iraq could cause a price shock harmful to world economic growth.

Meanwhile, the volume of oil exported by Iraq under UN supervision fell slightly last week to 13.1m barrels, about 1.9m barrels a day, the office of the UN oil-for-food programme said yesterday.

UN Secretary General Kofi Annan approved a plan, worth $4.93 billion, for distributing food and other civilian imports in the current 180-day phase of the programme, which began on December 5.

Last week's sales generated an estimated $369m in revenue, compared with $409m the previous week, when Iraq exported $14.3m barrels of crude, the office said.

l The Opec will hold an extraordinary ministerial meeting on Sunday at its headquarters here, an Opec source said yesterday.

— By Pascal Fletcher

CARACAS, Venezuela (Reuters) - Foes of Venezuelan President Hugo Chavez, marching in their thousands in Caracas, tore up income-tax forms on Tuesday as they added a tax revolt to a five-week-old strike crippling the nation's crucial oil exports.

But the leftist former paratrooper, who survived a coup in April, vowed to resist what he called their "economic war" to oust him as president of the world's No. 5 oil exporter.

Waving national flags and blowing whistles, the anti-Chavez demonstrators marched to government tax offices in east Caracas on the 37th day of an opposition strike aimed at forcing the populist leader to resign and call early elections.

The grueling shutdown has strangled Venezuela's oil output and shipments, jolting world oil markets and bleeding government coffers of millions of dollars a day of oil income.

"We are not going to pay taxes until this government goes," 52-year-old housewife Belkis Soto told Reuters as she took part in the march. Many protesters, who include middle class professionals, housewives and students, waved tax declaration forms, which they ripped up outside the tax offices.

The opposition, which has accompanied the strike with almost daily street protests, has called on individuals and firms to stop paying taxes, whether income or sales taxes.

But Chavez, who led a coup attempt in 1992 and was elected president six years later, is refusing to quit.

"We are in a situation of economic and political war because that is what the opposition wanted. ... Let's give them war then," he told reporters in west Caracas.

Earlier, speaking at a school, he warned his striking opponents their refusal to pay taxes was against the law. "They've tried to break the oil industry ... now they're trying to break the national treasury so there is no money," he said.

Tax authorities say offenders face fines and prison terms ranging from six months to seven years.

As a result of the strike, the government is reducing by half its original 2003 growth forecast of 2.5 percent to 3.5 percent. It has said it will announce tough belt-tightening measures to offset the strike losses.

"READY FOR THE WORST"

But Chavez seems determined to fight back. He purged the armed forces of opponents following the short-lived coup against him in April. He is doing the same with the strike-hit state oil giant PDVSA, the motor of the Venezuelan economy.

"I'm ready for the worst and on any front, we'll defeat the enemies of the nation," he said.

Despite calls from some opponents for the armed forces to topple Chavez, or at least refuse to obey him, Venezuela's army commander told Reuters on Monday the army would not intervene in the crisis and backed a negotiated political solution.

Tensions have been high since clashes on Friday between pro- and anti-Chavez protesters, in which two supporters of the president were shot and killed. The deaths triggered a storm of accusations between the government and its foes.

Police in La Guaira, a port just north of Caracas, fired tear gas on Tuesday to keep apart feuding followers and foes of the president.

Chavez's opponents say the left-wing policies of his self-proclaimed "revolution," which include a nationalistic oil policy and increased state intervention in the economy, are dragging the country toward ruin and Cuban-style communism.

The strike gripping the oil industry has disrupted oil shipments to the United States, which normally obtains more than 13 percent of its crude imports from Venezuela.

"VENEZUELA THE LOSER"

"At the end of the day, Venezuela is going to be the loser in this if it doesn't resolve this because we'll buy our oil someplace else," a senior State Department official, who asked not to be named, told reporters in Washington.

Oil prices, which rose close to two-year highs last week, fell heavily on Tuesday as leading OPEC heavyweight Saudi Arabia pushed the oil exporters' cartel for a hefty oil output increase to fill a gap left by the Venezuela strike.

The government insists strike-hit oil operations are being restored to normal. Striking executives in the state oil giant PDVSA, many of whom have been fired, deny that.

Energy Minister Rafael Ramirez said on Tuesday that PDVSA would be restructured because of the conflict and also to reduce its high administration costs. The transition would decentralize PDVSA away from Caracas to two operations in the west and east of the country.

Potentially adding to the problems from the oil strike, Venezuela's bank workers said they would decide this week on a proposed 48-hour halt to all banking operations.

The opposition is setting its sights on a Feb. 2 referendum scheduled by electoral authorities to vote on Chavez's rule. But the poll is nonbinding, and the president, whose term is scheduled to end in early 2007, has said he will ignore the results, even if he loses massively.

Cartel hopes to ease worries of oil shortage Associated Press Last Updated: Jan. 7, 2003

London - Hoping to ease fears of a possible oil shortage, OPEC representatives plan an emergency meeting this weekend to discuss boosting the cartel's crude production by up to 6.5%, an OPEC official said Tuesday.

Oil prices have surged in recent weeks on concerns about deepening turmoil in Venezuela and a possible war against Iraq - two key members of the Organization of Petroleum Exporting Countries. The group is now weighing proposals to increase output by as much as 1.5 million barrels a day in an effort to dampen prices.

An increase in production would represent an abrupt reversal in OPEC policy. OPEC's 11 members decided less than a month ago to slash output by up to 1.7 million barrels a day in the hope of preventing a price decline when seasonal demand dips in spring.

Ministers of each member country except Algeria have agreed to meet Sunday at the group's headquarters in Vienna, Austria, the official said. Algerian minister Chakib Khelil was aboard a plane late Tuesday and could not be reached to confirm if he could attend, said the official, speaking on condition of anonymity.

Since OPEC's decision Dec. 12 to cut production, worrisome signs of a potential shortage have begun to appear.

Oil shipments from Venezuela, normally OPEC's third-largest producer, have dwindled by some 80% because of a month-old strike aimed at forcing the country's president, Hugo Chavez, from office. A U.S.-led attack on Iraq would halt exports from that country, which has the world's second-biggest crude reserves after Saudi Arabia.

OPEC officials have said the group cannot pump enough additional crude to make up for a simultaneous loss of exports from Venezuela and Iraq, which together have historically exported roughly 4 million barrels a day. OPEC's remaining members have spare production capacity of 3.3 million barrels a day, according to the Paris-based International Energy Agency, the West's energy watchdog.

Market fears have driven crude prices well above the psychologically important threshold of $30 a barrel as a result.

OPEC supplies about one-third of the world's crude. Iraq is a member but doesn't participate in the group's production agreements because the United Nations oversees the bulk of its exports.

Saudi Arabia, OPEC's most influential member, has proposed that the group raise output by 1.5 million barrels a day.

New York Times Published Jan. 8, 2003 OPEC08

In an effort to scale back high oil prices, the Organization of the Petroleum Exporting Countries appears likely to meet in Vienna, Austria, as early as this weekend to discuss increasing production by up to 2 million barrels a day, or 8.7 percent, a senior OPEC delegate said Tuesday.

Oil prices, which are about 45 percent higher than they were a year ago, have climbed particularly steeply over the last month because a general strike in Venezuela against President Hugo Chavez has virtually shut down oil production there. The price fell sharply Tuesday on reports of the possibility of an emergency meeting, with crude oil for February delivery declining $1.02 cents, or 3.2 percent, to $31.08 a barrel in New York.

"With regard to the price, there is an agreement from all the countries that the price should not go any higher than $28 a barrel," said one senior OPEC delegate, who spoke on the condition of anonymity. A production increase, he said, is driven by "our strong commitment to have enough oil on the market at all times and not to let a shortage take place."

But oil industry analysts and traders pointed out that any additional oil exported by OPEC would not reach the United States soon. As a result, they said they expected the price of oil in the United States to remain above $30 a barrel. Those high prices, in turn, have pushed up retail prices in the United States of gasoline, heating oil and jet fuel.

"The global oil markets are losing 2 to 3 million barrels a day because of Venezuela, so an increase by OPEC of about 1.5 million barrels a day is still a far cry from what the markets need," said Philip Flynn, senior energy analyst at Alaron, a Chicago futures brokerage. "It's a classic case of OPEC trying to jawbone the market down. And the market is believing it, because the market is a very, very fickle animal right now."