QUESTION: On a related matter, OPEC is meeting at the week end to discuss the possible increase in output to compensate for the reduction in output in Venezuela. Do you -- does the United States have any views on whether an agreement to increase output would be a good thing?

MR. BOUCHER: We've seen a number of statements from members of OPEC about possibly increasing production and that would be a positive development. Obviously they're going to have to get together and decide, but we're also in touch with various countries involved.

QUESTION: Can you tell us what countries?

MR. BOUCHER: No, I think I'll stop at that.

QUESTION: OPEC members?

MR. BOUCHER: Yeah.

QUESTION: Yeah? And putting -- saying that you think it would be a positive thing if --

MR. BOUCHER: Our view is that it would be a positive development if a -- the various ideas that have been discussed of that production, if those were carried out, that would be positive. And we've made that view known.

Opec called an emergency weekend meeting to decide how much more crude to pump to prevent a long-running strike in Venezuela and a looming war in Iraq causing an oil price shock.

The Organisation of the Petroleum Exporting Countries announced it will meet on January 12 in Vienna after a 25 percent rise in prices during November and December.

Kuwaiti Oil Minister Sheikh Ahmad al-Fahd al-Sabah said the cartel was discussing an increase of 1.0-1.5 million barrels per day, a rise of four to 7% on limits now of 23 million bpd.

"There are two proposals. One million barrels per day and 1.5 million barrels a day," the minister told reporters in Kuwait. "We would favour raising by one million and would agree to 1.5 if necessary."

Opec wants to bring prices back inside its $US22-$28 target band, a range it feels does not threaten world economic growth.

"The world has tried everything to boost growth without much success and if oil prices stay high we're in for another year of very slow growth," said Mehdi Varzi of Dresdner Kleinwort Wasserstein.

Expectations for more Opec oil already have knocked prices from their end-December peak of $US33.65 a barrel for US crude, when it was first revealed the cartel was discussing a substantial output increase.

"They're trying to prevent panic on the oil markets. Most in Opec are resigned to a war in the Gulf," said Varzi.

In Wednesday trade, US crude eased another 93 cents to $US30.15 a barrel and London Brent blend shed $US1.08 to $28.25 a barrel.

The cartel's most influential producer Saudi Arabia is pushing for a big increase while most other countries, including Kuwait, Algeria and Libya, prefer an addition of one million barrels daily.

The group, which pumps about 60 percent of world exports, wants to plug a 2.7 million bpd supply gap from Venezuela, where a strike against President Hugo Chavez is in its sixth week.

Loss of Iraqi supplies in the event of a US military attack to oust President Saddam Hussein would remove another two million bpd from the 77 million bpd world market.

"It is a difficult situation we are in, since we are dealing with a market affected by a set of extraordinary circumstances that are beyond our control," said Opec Secretary-General Alvaro Silva.

Many in Opec already are pumping at, or close, to capacity. Only Saudi, the United Arab Emirates, Iran and Nigeria can add volumes among the 11 member group, Varzi said.

Shippers and oil company sources said Riyadh already has lined up more crude sales to the United States, Venezuela's largest customer.

Consumer countries will welcome any action by Opec to stop a rise in energy inflation.

British Energy Minister Brian Wilson said of Opec's plans: "This reinforces my view that there should be no rush to increase pump prices for the motorist." High taxes mean UK motor fuel prices are among the highest in the world.

Source: Reuters

OPEC Secretary General Alvaro Silva-Calderon remained cautious over the Organisation of Petroleum Exporting Countries’ plan to hike its oil output at an extraordinary meeting on Sunday. "Any larger increase or cut in output (than 500,000 barrels a day) has to be carefully evaluated within the prevailing circumstances," Silva-Calderon told the cartel’s OPECNA news agency in Vienna. In March 2000, OPEC agreed to a price band mechanism under which the cartel would raise output by 500,000 barrels per day if prices remain above the range of 22 to 28 dollars for more than 20 consecutive trading days. The mechanism also sets out that OPEC would cut its output by the same amount if prices fell below 22 dollars for 10 consecutive days. On Tuesday the price of OPEC’s reference basket of seven crude oils remained above 28 dollars for the 14th consecutive trading day. If prices continue at these levels, the 20th day will fall on January 15.

OPEC looks set to substantially hike its production at its extraordinary ministerial meeting in Vienna on Sunday, to respond to growing demand sparked by the general strike in Venezuela and the threat of war in Iraq. "It is a difficult situation we are in, since we are dealing with a market affected by a set of extraordinary circumstances that are beyond our control," Silva-Calderon said. Sources close to the cartel have said that Saudi Arabia, the world’s leading oil exporter at some 7.5 million barrels a day, is calling for a total output increase of 1.5 million barrels a day. The Saudi proposal is backed by Qatar, which currently holds the rotating OPEC presidency. The other nine member countries are in favour of a production hike of one million barrels a day, the sources said. OPEC’s current official output quota is set at 23 million barrels a day excluding Iraq.

Oil prices slid on Tuesday after OPEC announced it planned to hike its production levels in order to bring down prices, which had reached particularly high levels in recent weeks. In New York, reference light sweet crude for February delivery dropped by 98 cents a barrel to 31.08 dollars, while the OPEC reference basket of seven crude oils dropped 17 cents to 29.72 dollars. Meanwhile,US oil prices fell again on Wednesday, bringing losses so far this week to over $2 as major producers prepared to make a hefty injection of barrels into the market to compensate for the supply-sapping strike in Venezuela. US light crude dropped 10 cents to $30.98 a barrel, after diving $1.02 in New York on Tuesday and 98 cents a day earlier. Oil hit a two-year peak at $33.65 on December 30.

World crude oil prices have rallied $5 to $6 in the last two months on concerns the Venezuela strike would lead to a supply crunch in the United States. Venezuela supplies about 13 percent of US oil imports. Traders are also worried that the looming threat of war in Iraq could disrupt crude flows from other major producing nations in the Middle East and dent supplies further. Dealers said the additional volumes proposed by Saudi Arabia were larger than expected. They would come on top of official output limits of 23 million bpd agreed by OPEC in December. Most expect an agreement in the range of 1.0-1.5 million bpd, the volume Kuwait’s oil minister, Sheikh Ahmad al-Fahd al-Sabah, says is favoured. Sheikh Ahmad and his Iranian counterpart Bijan Zanganeh are expected to meet in Tehran on Saturday for talks focused on OPEC, a Kuwaiti official said on Wednesday. Another Kuwaiti official said Sheikh Ahmad had not answered OPEC headquarters on whether he would attend a possible emergency meeting on Sunday on a production hike. The Organisation of Petroleum Exporting Countries is considering an emergency meeting on January 12 to finalise the deal. Otherwise matters could be settled by telephone.

09 Jan 2003 01:29 www.alertnet.org

(Adds currency reference, paragraphs 2,6, traders', analysts' comments, paragraphs 15-17) By Pascal Fletcher

CARACAS, Venezuela, Jan 8 (Reuters) - Venezuelan bank workers on Wednesday called a 48-hour shutdown of banking services this week, escalating a five-week opposition strike that has already crippled the country's vital oil exports.

The bank stoppage call spooked Venezuela's currency market, sending the local bolivar tumbling against the U.S. dollar.

Union leaders said the action by employees at private and state banks across the South American nation would halt services to the public on Thursday and Friday.

"We are calling for a complete banking stoppage," Jose Elias Torres, president of the bank workers' union federation Fetrabanca, told a news conference in Caracas.

Fetrabanca called the work stoppage in support of the grueling strike launched by opposition leaders on Dec. 2 to press leftist President Hugo Chavez to resign and hold early elections. The ongoing shutdown has crippled oil output and shipments by the world's No. 5 petroleum exporter.

The Venezuelan Central Bank's bolivar reference rate <VEBFIX=> against the U.S. dollar closed 5.7 percent down at 1,507/1,510.50 bolivars. The local currency's interbank rate <VEB=> <VEB2=> slid by nearly 10 percent against the U.S. greenback to an average low of 1,585 bolivars, traders said.

As the opposition's economic offensive against the populist president increased, so too did tension on the streets.

National Guard troops fired tear gas on Wednesday to keep back stone-throwing Chavez supporters who besieged the National Electoral Council in Caracas, where opposition leaders were holding a news conference. No injuries were reported.

The pro-Chavez demonstrators chanted "Chavez is not resigning" and "The banks belong to the people."

LINES AT BANKS

The 48-hour banking strike heralded fresh disruptions for the Venezuelan public, already coping with a scarcity of gasoline and shortages of some food products caused by the general strike. Private banks had already been restricting their daily services to three hours a day during the strike.

After the stoppage was announced, lines formed at banks in Caracas as clients rushed to withdraw cash before the weekend.

"It's madness. People have needs and in those two days (Thursday and Friday), they might have to get cash," said 30-year-old administrative assistant Mauro Rodriguez.

The opposition has set its sights on a Feb. 2 referendum scheduled by electoral authorities to vote on whether Chavez should resign. But the poll is nonbinding, and the president, who was elected in 1998 and whose term ends in early 2007, says the proposed election is unconstitutional.

More than five weeks into the strike, Venezuela's economy is reeling from the oil shutdown. Oil sales account for half of government revenues and 80 percent of all export revenues.

Local currency traders said the bank strike call, combined with the deteriorating economic situation, was unnerving local banks, companies and savers. "That frightened a lot of people who went out and converted their bolivars into dollars, in case the situation gets worse," one trader said.

Analysts questioned whether the government, losing millions of dollars every day through the oil strike, would be able to meet future domestic and external debt payments.

"I see things going down, down, down, down," Michael Gavin, Head of Latin American Economic Research for UBS Warburg, told Reuters. "I think it's tough to see how they get through the first quarter," he added.

CHAVEZ FIGHTING BACK

But local experts said that beyond the nuisance to the public, the overall economic impact of the two-day bank stoppage would be limited. "It's more a symbolic shout than anything else," one, who asked not to be named, told Reuters.

Former paratrooper Chavez, who survived a coup in April and refuses to quit, has vowed to beat the strike and act against any attempt by his foes to close down the banking sector.

Venezuela's Central Bank said it would continue its operations but it was not clear whether the inter-bank foreign exchange market would be running on Thursday and Friday.

Stepping up their economic war of attrition against Chavez's government, opposition leaders have also called on Venezuelans to stop paying taxes. 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.

And Chavez is fighting back, sacking striking oil executives in the state oil giant PDVSA and sending troops and loyal personnel to re-start refineries and export terminals.

The government insists strike-hit oil operations are being restored to normal. The strikers say the shutdown is holding.

The oil industry disruption has hit shipments to the United States, which normally obtains more than 13 percent of its crude imports from Venezuela. A senior U.S. official said on Tuesday the United States would buy its oil elsewhere.

Many major industries and shops remain closed and many private schools and universities are not starting classes.

Washington - The State Department is making private appeals to members of the world oil cartel to increase crude production to offset a dwindling output from Venezuela.

Department spokesman Richard Boucher said several members of the Organization of Petroleum Exporting Countries had been approached.

A boost in output "would be a positive development," he said.

Boucher did not identify which members of the cartel had been solicited in advance of an emergency meeting this weekend.

The oil-producing countries are expected to discuss boosting the cartel's production by up to 6.5 per cent.

Oil prices have surged in recent weeks amid concerns over deepening turmoil in Venezuela and a possible war against Iraq.

OPEC is weighing proposals to increase output by as much as 1.5 million barrels a day in an effort to subdue 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 hope of preventing a price decline when seasonal demand dips this spring.

Ministers of all member countries except Algeria have agreed to meet Sunday at the group's headquarters in Vienna, Austria.

A month ago OPEC voted to cut production, and signs of a potential shortage surfaced.

Oil shipments from Venezuela, normally OPEC's third-largest producer, have dwindled by some 80 percent 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.

In recent years, Venezuela has ranked fourth — behind Saudi Arabia, Mexico and Canada — as an oil source for the United States.

In 2001, 1.3 million barrels were imported daily from Venezuela, about 13 percent of U.S. imports, the Energy Department said.

A member of the worldwide oil cartel that sets oil prices and production, Venezuela's government-owned oil company also has one of the largest refining systems in the Western Hemisphere. Its gasoline is sold by Tulsa, Oklahoma-based Citgo, the Venezuelan company's U.S. refining and marketing subsidiary.