OPEC said to consider 8 percent increase in oil output

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."