europe.cnn.com Sunday, January 12, 2003 Posted: 8:58 PM HKT (1258 GMT)

Is OPEC pumping enough oil to promote global economic growth?

VIENNA, Austria -- OPEC leaders are meeting in Vienna to discuss raising oil production in a bid to slow rising prices.

OPEC -- Organization of Petroleum Exporting Countries -- called the meeting amid fears of supply problems caused by an ongoing strike in Venezuela.

The six-week old strike by political opponents seeking to oust President Hugo Chavez has forced a cut in the country's exports by about two million barrels a day.

Venezuela is normally OPEC's third-largest producer and a major oil supplier to the United States.

But Saudi Arabian Oil Minister Ali Naimi said OPEC's official output target of 23 million barrels a day should not be changed.

He told reporters that an increase in the target "would really flood the market."

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

Naimi acknowledged that the Venezuelan strike has deprived the market of crude, but said that OPEC's production ceiling should remain unchanged.

He 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.

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.

Fears about a possible U.S.-led war against Iraq have increased the pressure on world oil prices.

Fears about a possible U.S.-led war against Iraq have increased the pressure on world oil prices.

Iraq has the second-biggest oil reserves after Saudi Arabia.

"We have to see what quantity is required," said Obaid bin Saif Al-Nasseri, oil minister for the United Arab Emirates.

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.

www.toledoblade.com By FRIDA GHITIS SPECIAL TO THE BLADE

WASHINGTON - The Bush administration is straining to find the right tone in its approach to the growing crisis in Venezuela. One day spokesman Ari Fleischer says the United States would like to see new presidential elections. The next day, after someone notes a new election might be unconstitutional, he says it’s really a referendum the White House supports.

Whatever it is, Mr. Fleischer emphasizes that it ought to happen democratically, within "the confines of the constitution of Venezuela."

The reality, however, is that at a time when Washington can least afford to see oil production disrupted, few people in Latin America believe the U.S. government’s claim to stand for democratic rule. Washington’s influence in Venezuela’s crisis has been deeply eroded by its own actions.

During normal times, the United States imports 14 percent of its oil from the South American country. But these are not normal times. The Venezuelan oil industry is practically paralyzed by a nationwide strike by opponents of President Hugo Chavez. At the same time, the United States is poised for a possible war in Iraq, which could disrupt oil supplies in the Persian Gulf. From Washington’s perspective, the timing of the troubles in Caracas could hardly be any worse.

If the timing is poor today, the prospects for the coming weeks look even grimmer. Venezuelans are passionately divided. Millions of Mr. Chavez’s opponents want him out of office, and millions of his supporters - many of them armed - say they will do what it takes to keep him in power. The ingredients for a disastrous civil war are all in place.

The United States would like to diffuse the situation, but it is reaping what it sowed last April, when it spectacularly mishandled the Venezuelan crisis. It proclaimed support for the overthrow of the highly controversial, but nonetheless democratically elected Mr. Chavez.

Like many in Washington, Latin American leaders would like to see the Chavez era end. But the region has struggled over the last two decades to create and strengthen democracy. That is why when a bungled coup removed the former colonel from power for 48 hours, Latin American governments quickly spoke out against what was a flagrant violation of democratic principles. Washington, however, rushed to celebrate, blaming Mr. Chavez for his own fate and accepting at face value the coup plotters’ false assertion that the president had resigned.

Many accused Washington of involvement with the coup. Administration officials offered conflicting accounts of meetings with the leaders of the anti-Chavez movement. Some said U.S. authorities had offered tacit support for the forceful removal of the president; others maintained that the United States had urged the opposition to work through constitutional means.

The United States would be overjoyed if Mr. Chavez left office. The former paratrooper has been a burr under Washington’s saddle since he took office four years ago. The nation that was once a reliable and friendly supplier of oil has become a source of constant worry since he took office. His inflammatory leftist rhetoric has been consistently anti-American. When the United States attacked Afghanistan, he accused America of committing a crime as great as that of Sept. 11.

He has successfully pushed for OPEC to control production and thus push oil prices higher. When he took office oil was selling for less than $10 a barrel, less than one-third today’s price.

To rally OPEC unity he has undertaken diplomatic tours that to Washington eyes look like the work of the travel agent from Hell. He has visited Muammar Kaddafi in Libya, Saddam Hussein in Baghdad, the Ayatollah Ali Khameini in Tehran, and Fidel Castro, his close friend, in Havana.

It is not only Washington that dislikes Mr. Chavez. His sympathy for Colombia’s leftist guerrillas has caused friction with the neighboring country, and his friendship with Castro has worried many in the hemisphere. But nowhere is the displeasure more intense than among Mr. Chavez’s own people.

Mr. Chavez, who once tried to take power through a coup, has enraged his countrymen with inflammatory and divisive populist rhetoric and with political moves that concentrate power in his own hands. During his tenure the poverty that already affected a majority of Venezuelans has become even more pervasive. But many of the poor see him as one of them and still revere him, blaming the rich and powerful for the country’s problems, as Mr. Chavez does.

Ironically, events in Venezuela may have more power to influence Washington’s actions than vice-versa. If the anti-Chavez strike that has crippled Venezuela’s oil production does not end, Washington is going to find it more challenging to launch a war in Iraq.

While Washington was focusing all its energy and attention on the Middle East, its top oil supplier in its own hemisphere was spinning out of control. But the United States cannot present itself as an honest broker to help resolve the crisis. Its words are now seen with absolute mistrust by Mr. Chavez and his supporters.

Frida Ghitis is the author of The End of Revolution: a Changing World in the age of Live Television. She writes about world affairs.

www.alertnet.org 12 Jan 2003 10:14

VIENNA, Jan 12 (Reuters) - Venezuelan oil officials said on Sunday that sabotage at oilfields, refineries and computer systems was causing pollution and preventing a swift recovery in the industry, crippled by a six-week-old strike.

Arriving at an emergency OPEC meeting in Vienna called to deal with the extended Venezuelan stoppage, state oil company chief Ali Rodriguez said the South American country was aiming to supply its minimum supply obligations by the end of January.

Striking executives at Petroleos de Venezuela, many of whom have now been sacked by Rodriguez, say incompetence by replacement workers is to blame for the accidents.

"There has been electronic sabotage and sabotage on valves, because the (strike) campaign has been aimed at causing accidents, and we have to take anti-sabotage measures to start up safely," he told reporters on arrival in the Austrian capital.

Rodriguez, a former secretary-general of OPEC, said the country still aimed to meet its minimum contractual supply obligations by the end of January, but declined to provide any figures on output in the world's fifth largest exporter. Venezuela previously supplied 13 percent of U.S. oil imports.

A full recovery in ouput by the end of February, a previous target, would not be achieved because of the extensive sabotage, he said.

Striking oil company executives, demanding the government's resignation, said crude flows dropped below half a million barrels per day last week, from more than three million in November.

The country's main oil refineries have ground to a virtual halt, export terminals have closed or drastically reduced loadings and long lines have formed at gasoline stations, while Venezuela resorts to importing fuel.

"Internal market distribution is being normalised, we have managed to free up port operations and we have drawn down stocks whose build-up had blocked production," Rodriguez said.

"This has helped a sustained rise in output, so this month we should achieve our objectives," he said without providing details.

"Our objective is to reestablish basic production this month and restart the refineries to satisfy the internal market because we are importing gasoline at prices far above what we sell it at, which is creating losses for the company," Rodriguez said.

In Lake Maracaibo, where Venezuela pumps about half its crude oil, Rodriguez blamed a recent oil spill on sabotage. In the country's largest refinery, Amuay-Cardon, he said striking workers had shut the plant incorrectly, leaving deposits of asphalt and sulphur in some units.

In the smaller El Palito refinery, Rodriguez said a fire last week was caused by a faulty seal which has now been corrected and output there was restarting.

Asked whether oil production would be fully restored by the end of February, Rodriguez said, "Not totally because damage has been very great and we don't know if there has been sabotage in some wells, so we have to be very careful."

www.bday.co.za

VIENNA - Opec energy ministers gathered in Vienna on Sunday to respond to calls for an increase in oil production to stave off an oil price shock threatened by a strike in Venezuela and possible war in Iraq.

Delegates attending an extraordinary meeting of the Organisation of Petroleum Exporting Countries (Opec) were expected to agree to pump more oil to help rein in prices which topped $30 a barrel in London and New York recently before easing back slightly.

Opec heavyweight Saudi Arabia sought to calm jittery oil markets, saying it would ensure there was adequate supply and could raise its own output if needed to 10.5 million barrels per day within two weeks, from a quota of 7.5 million.

But Saudi Arabian Oil Minister Ali al-Nuaimi said the 11-member cartel would probably leave its overall output quota unchanged at 23 million barrels per day, while compensating for the lack of supplies from Opec member Venezuela, where a six-week-old strike has cripped oil exports.

"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 told reporters ahead of the Opec 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.

By filling the gap left by Venezuela the cartel, which produces about one third of the world's crude oil, aims to restore prices to within its target range of $22 to $28 per barrel.

In New York, reference light sweet crude February-dated futures traded at $31.68 per barrel on Friday, while London benchmark Brent North Sea crude oil for February delivery stood at $29.68 per barrel.

Analysts say some OPEC members, notably Saudi Arabia which has the most space in its 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.

Although high oil prices boost producers' revenues, Opec is concerned that a price spike would jeopardise a global economic recovery and prompt consumers to switch to alternative sources of energy, thereby depressing oil demand.

Traders are growing nervous that 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.

A source at the cartel's Vienna headquarters said that any rise in Opec production would take effect on February 1 at the earliest, and would probably be rolled back once exports recovered from Venezuela.

But with oil stock levels in consumer countries already very low, and the spectre of a war in Iraq looming large, analysts do not expect oil prices to fall too far even with the extra Opec crude.

AFP

abcnews.go.com — By Peg Mackey and Michael Georgy

VIENNA (Reuters) - Leading OPEC producer Saudi Arabia said on Sunday that the cartel is already responding to a Venezuelan strike and sees no real shortage now on world oil markets.

Saudi Oil Minister Ali al-Naimi said the group was acting to fill what he estimated as a two million barrels per day gap on the international market caused by the six-week-old strike. "There is no shortage. We never allowed the shortage to take place," Naimi told reporters before Sunday's emergency OPEC meeting.

Asked if OPEC was supplying the market right now with all the oil it needed, he said: "Yes, we want to make sure there is no shortage."

Riyadh is trying to prevent the Venezuelan strike, combined with the threat of war against Iraq, causing an oil price spike that would hurt the world economy and hit crude demand. U.S. oil prices recently rose above $33 a barrel for the first time in two years.

Naimi said Saudi, which was estimated in December to be pumping about eight million bpd, could reach 10 million bpd within two weeks.

"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.

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

Naimi ruled out any increase at Sunday's meeting of formal limits of 23 million barrels per day for the 10 OPEC members with quotas, simply because Venezuela is out of the market.

"An increase in the ceiling would really flood the market," he said. "At the last December meeting we evaluated the market needing 23 million barrels per day. OPEC made a worldwide commitment. The ceiling is still 23 million barrels a day and we will maintain 23 million barrels a day," he told reporters.

That means that the remaining nine members of the group with quotas, excluding Venezuela and Iraq, are likely to agree a temporary increase, making clear they will reverse the addition once Venezuela returns. Iraq has had no quota since the 1990-1991 Gulf War.

Delegates said ministers might decide simply to announce their intention to make up for the Venezuelan loss without announcing any exact additional volume increase or higher individual allocations.

Ministers so far have said they were discussing a 1.0-1.5 million bpd increase. Naimi would not comment directly on that volume. But he said that with a Venezuelan outage of two million bpd, an increase of 1.5 million bpd would not be enough.