Opec chief expects output hike

REUTERS[ SUNDAY, JANUARY 05, 2003 05:57:02 PM ]

DOHA: Opec president Abdullah al-Attiyah said on Sunday he expected the cartel to increase crude oil supplies by up to one million barrels per day (bpd) in a bid to quell soaring prices.

"An increase could be anywhere between 500,000 bpd to one million bpd... It will depend on consultations," Attiyah, the oil minister of Qatar, told Reuters.

Unless there is a sharp drop in prices, the cartel is on course to lift supplies in mid-January via its mechanism that stipulates supplies be raised by 500,000 bpd if prices for a basket of OPEC crudes stay over $28 a barrel for 20 days.

The group is not bound by the 500,000 bpd volume. Opec's crude basket was last valued at $30.05 on Thursday, the 13th day the reference price was above $28.

It is still not clear whether Opec ministers will have to meet to raise output or decide by telephone to lift supplies.

"We should decide before January 14 whether the mechanism should be triggered automatically or if there should be an extraordinary meeting," said Attiyah, who from January 1 took over the Opec presidency from Nigeria's Rilwanu Lukman.

"We are still in the consultation process."

Oil prices have rallied sharply on fears that political turmoil in Venezuela will spur a supply crunch in the United States and that a war on Iraq will deepen shortages.

Opec agreed in December to raise output limits by 1.3 million bpd to 23 million bpd from January 1 in a bid to legitimise quota-busting that had left actual output running at 24.5 million bpd prior to a strike in exporter Venezuela.

Their pact to curb output was based on the assumption that Venezuelan supplies would resume imminently, but the strike which has crippled the Opec member's oil operations is now in its fifth week.

Of the 10 countries bound by quotas, only Opec's leading producer Saudi Arabia and its Gulf ally the United Arab Emirates have any significant spare capacity.

Their combined excess volume would be sufficient to replace either Venezuelan or Iraqi exports. But analysts said the unlikely scenario of a simultaneous halt in both countries would test the cartel's supply limits.