economictimes.indiatimes.com PTI[ SUNDAY, JANUARY 12, 2003 08:50:38 PM ]

VIENNA: Opec energy ministers called on Sunday for an increase in oil production to make up a shortfall of two million barrels per day from strike-hit Venezuela in a bid to stop spiralling oil prices.

The 11-nation Organization of Petroleum Exporting Countries needs to raise oil output by that amount to cover the shortfall from Venezuela, where a six-week old strike has crippled production, Algerian Oil Minister Chakib Khelil said.

"I think we're going to raise" production, he said as Opec began an emergency meeting in Vienna. "We need two million" barrels per day more, he added.

But the exact amount was not clear, particularly since many Opec members are already thought to be producing above their individual output quotas.

The supply squeeze has nevertheless sent prices above Opec's $22-$28 per barrel target price. Crude prices surged above 30 dollars a barrel in London, even reaching $33 in New York recently before easing back slightly.

In addition, traders are worried a US-led war in Iraq might be launched before the strike in Venezuela is resolved, depriving world oil markets of around five million barrels of oil per day from the two producers, or even more if the war were to destabilise other Middle East suppliers.

The United States has strategic oil reserves of 600 million barrels it can dip into if necessary, but so far it has been reluctant to do so.

Saudi Arabian Oil Minister Ali al-Nuaimi said here that Opec would probably leave its overall output quota unchanged at 23 million barrels per day (bpd), while making up the shortfall from Venezuela.

Seeking to calm jittery markets, Nuaimi said Saudi Arabia would ensure there was adequate supply and could raise its own output if needed to 10.5 million bpd within two weeks, from a quota of 7.5 million.

"There is not a shortage (of supply) in the international market, there is only a shortage from Venezuela, probably of two million barrels per day," he said.

"The ceiling of 23 million barrels per day, we will leave it," he added.

Analysts say some Opec members, notably Saudi Arabia which has the most spare production capacity, have in any case already been producing above their individual quotas.

"We believe that production from the Opec members outside of Venezuela has been rising steadily since the start of the strike and that the decision to be reached in Vienna is to make this formal," Deutsche Bank analyst Adam Sieminski in London said ahead of the meeting.

Venezuela sent a beefed-up delegation including Oil Minister Rafael Ramirez and the president of state-owned oil company giant Petroleos de Venezuela (PDVSA), Ali Rodriguez - a former Opec secretary general - to join the talks.

Asked what Opec could do to help Venezuela, Ramirez said "stabilise the market�, as he arrived for the meeting, without specifying exact measures.

Indonesia, Iraq, Kuwait, Iran and Libya did not send their ministers to the hastily called get-together, although they were still expected to be represented.

abcnews.go.com — By Tom Ashby and Ellie Tzortzi

VIENNA (Reuters) - OPEC Sunday readied extra production to stave off a spike in oil prices threatened by a strike in Venezuela and a possible war in Iraq.

The Organization of Petroleum Exporting Countries is set to respond with a temporary production hike to fill the Venezuelan gap in a bid to bring prices down. Talks that started at 1130 GMT were expected to yield a result by late afternoon or early evening in Vienna.

Leading cartel producer Saudi Arabia, in control of most of the world's spare capacity, said it was already pumping more to fill the two million barrels a day hole on world markets. "There is no shortage. We never allowed the shortage to take place," Naimi told reporters before Sunday's emergency OPEC meeting.

Riyadh is trying to prevent oil spiking to heights that might harm world economic growth and hit crude demand. U.S. oil prices recently rose above $33 a barrel for the first time in two years. It was valued at $31.58 Friday.

Naimi said he could open the taps to 10 million barrels daily at just two weeks notice, some two million higher than estimated Saudi output in December.

"We can get to 10.5 right away but to maintain that level we need 90 days to formalize contracts for extra rigs with drilling companies," he added of the kingdom's full capacity.

Fellow cartel members the UAE, Kuwait, Nigeria and Algeria also held spare capacity, the minister said.

23 MILLION

Naimi opposed any increase at Sunday's meeting in formal limits for 10 member countries with quotas, because Venezuela is out of the market.

"At the last (December) meeting we evaluated the market needed 23 million barrels per day. The ceiling is still 23 million barrels a day and we will maintain 23 million barrels a day," he told reporters.

Delegates said ministers are likely to decide how much is missing from Venezuela and make clear they intend to reverse the addition once Venezuelan deliveries are restored.

With no end in sight for the strike, that could be some time. Ali Rodriguez, President of state Petroleos de Venezuela SA blamed sabotage at oilfields, refineries and computer systems for the prevention of a swift return to production.

Ministers from Kuwait and the UAE have said preliminary discussions focused on a 1.0-1.5 million bpd increase. But Saudi wants more. Naimi said that with a Venezuelan outage of two million bpd, an increase of 1.5 million would not be enough.

Delegates said that as a compromise, ministers might decide simply to make clear their intention to make up for the Venezuelan loss without announcing any exact additional volume increase, or individual allocations.

www.voanews.com VOA News 12 Jan 2003, 15:10 UTC

Opponents of Venezuela's President Hugo Chavez are planning to march on a military complex in Caracas Sunday despite violent clashes during an earlier protest at the site.

Opposition supporters say they will march on the military base, even though a similar protest on January 3 ended in clashes with Chavez supporters that left two people dead and more than a dozen wounded.

Saturday, President Chavez again issued a stern warning to his opponents, vowing to break a six-week general strike that has crippled Venezuela's economy and its vital oil industry.

Speaking at a rally of thousands of cheering supporters at a Caracas sports arena, Mr. Chavez said his revolutionary government will not give in to opposition demands for him to resign.

Accusing strike organizers of closing many of the nation's schools, Mr. Chavez said teachers who do not show up for work will be fired.

President Chavez's opponents began the general strike December 2 to force him to resign or call early elections. He refuses to step down, saying the labor action amounts to a coup attempt.

The political crisis has paralyzed the nation's petroleum industry, which accounts for about 80 percent of Venezuela's export revenue, and has helped push up world oil prices. Before the strike began, Venezuela was the world's fifth-largest oil exporter and a key U.S. supplier.

Some information for this report provided by AP, Reuters and AFP.

www.cbc.ca 11:16 AM EST Jan 12 BRUCE STANLEY

VIENNA, Austria (AP) - OPEC needs to compensate for a shortfall in oil exports from Venezuela, but it shouldn't change its official output target of 23 million barrels a day, the group's most influential oil minister said Sunday.

An increase in the target ``would really flood the market,'' Saudi Arabian Oil Minister Ali Naimi said ahead of an emergency meeting the Organization of Petroleum Exporting Countries planned later in the day at its headquarters in Vienna.

OPEC called the meeting last week hoping to calm fears of a supply crunch caused by an ongoing strike in Venezuela. The strike, launched Dec. 2 by political opponents seeking to oust President Hugo Chavez, has slashed the country's exports by about 2 million barrels a day. Venezuela is normally OPEC's third-largest producer and a major oil supplier to the United States.

OPEC pumps about a third of the world's crude supplies, which total 79 million barrels a day.

Naimi acknowledged that the Venezuelan strike has deprived the market of crude. ``I care about what the market needs,'' he said.

But while he added that OPEC's production ceiling of 23 million barrels a day should remain unchanged, Naimi declined to say how OPEC should try to compensate for the missing Venezuelan oil.

One possible solution would be for Venezuela's OPEC partners to increase their own production to cover the shortfall until Venezuelan exports can resume.

Saudi Arabia accounts for the bulk of the group's spare production capacity and would stand to gain from any such temporary adjustment of output quotas within the overall target. Saudi Arabia's current output quota is 7.5 million barrels a day, but Naimi said his country could boost daily production to 10 million barrels within two weeks.

Still, OPEC members worry that if they do raise production, the additional barrels might hit markets just as seasonal demand starts weakening in the spring.

Neither Venezuelan Oil Minister Rafael Ramirez nor Ali Rodriguez, head of the country's state-run oil company, would say if he supported an increase in OPEC production. An unspoken concern was that any reallocation of quotas to end the shortfall might take some of the external pressure off Venezuela's opposition to end its strike.

Fears of a possible U.S.-led war against Iraq have added upward pressure to world oil prices. Iraq has the second-biggest oil reserves after Saudi Arabia, and there has been a steady buildup of U.S. troops in the Persian Gulf.

Crude prices surged in recent weeks but fell sharply in anticipation of OPEC's boosting production. On the New York Mercantile Exchange, February contracts of light, sweet crude futures fell 31 cents Friday to close at $31.68. On London's International Petroleum Exchange, February Brent crude ended at $29.67 a barrel, up 3 cents.

OPEC's price target is $22-$28 per barrel of its benchmark blend of crudes.

OPEC sources have said the Saudis were proposing to increase the group's daily output by 1.5 million barrels. Other members, including Algeria and Libya, have favored a smaller increase of 1 million barrels.

``We have to see what quantity is required,'' said Obaid bin Saif Al-Nasseri, oil minister for the United Arab Emirates, said late Saturday as he arrived at a Vienna hotel.

OPEC President Abdullah bin Hamad Al Attiyah said Venezuela's strike has caused ``a little bit of a shortage,'' but he too refused to predict how much oil OPEC might add to the market to compensate.

``I've heard a lot of scenarios, a lot of numbers, but still we haven't reached the magic number,'' he said.

Any increase would take effect Feb. 1, Al Attiyah said. That means American importers would not see any fresh crude until at least mid-March because Saudi shipments take at least 40 days to reach U.S. ports.

The suddenness of OPEC's decision to call this meeting reflects its surprise at the deterioration in market conditions. Oil ministers for four of the group's 11 members were unable attend due to prior commitments. A fifth minister, Libya's Abdulhafid Mahmoud Zlitni, was unable to arrive Sunday because a sandstorm prevented his plane from leaving the Libyan capital, Tripoli.

Cartel members discuss how to make up for disruption caused by Venezuela. January 12, 2003: 10:15 AM EST money.cnn.com

VIENNA (Reuters) - OPEC Sunday readied extra production to stave off a spike in oil prices threatened by a strike in Venezuela and a possible war in Iraq.

The Organization of Petroleum Exporting Countries is set to respond with a temporary production hike to fill the Venezuelan gap in a bid to bring prices down. Talks started at 1130 GMT.

Leading cartel producer Saudi Arabia, in control of most of the world's spare capacity, said it was already pumping more to fill the two million barrels a day hole on world markets. "There is no shortage. We never allowed the shortage to take place," Naimi told reporters before Sunday's emergency OPEC meeting.

Riyadh is trying to prevent oil spiking to heights that might harm world economic growth and hit crude demand. U.S. oil prices recently rose above $33 a barrel for the first time in two years. It was valued at $31.58 Friday.

Naimi said he could open the taps to 10 million barrels daily at just two weeks notice, some two million higher than estimated Saudi output in December.

"We can get to 10.5 right away but to maintain that level we need 90 days to formalize contracts for extra rigs with drilling companies," he added of the kingdom's full capacity.

Fellow cartel members the UAE, Kuwait, Nigeria and Algeria also held spare capacity, the minister said. 23 million

Naimi opposed any increase at Sunday's meeting in formal limits for 10 member countries with quotas, because Venezuela is out of the market.

"At the last (December) meeting we evaluated the market needed 23 million barrels per day. The ceiling is still 23 million barrels a day and we will maintain 23 million barrels a day," he told reporters.

Delegates said ministers are likely to decide how much is missing from Venezuela and make clear they intend to reverse the addition once Venezuelan deliveries are restored.

With no end in sight for the strike, that could be some time. Ali Rodriguez, President of state Petroleos de Venezuela SA blamed sabotage at oilfields, refineries and computer systems for the prevention of a swift return to production.

Ministers from Kuwait and the UAE have said preliminary discussions focused on a 1.0-1.5 million bpd increase. But Saudi wants more. Naimi said that with a Venezuelan outage of two million bpd, an increase of 1.5 million would not be enough.

Delegates said that as a compromise, ministers might decide simply to make clear their intention to make up for the Venezuelan loss without announcing any exact additional volume increase, or individual allocations.