Opec meets to boost production

news.bbc.co.uk Sunday, 12 January, 2003, 00:28 GMT Venezuela's strikes have hit exports very badly

By Andrew Walker BBC economics correspondent in Vienna The oil producers' organisation Opec holds a meeting in the Austrian capital on Sunday, which is expected to agree an increase in production.

I support making sure the market is well-balanced

Ali al-Nu'aymi Saudi Oil Minister

The emergency meeting of ministers and officials from the organisation's 11 member countries was prompted by a sharp rise in prices, caused by the continuing strike in Venezuela's oilfields.

Since mid-December the price of crude oil has been above the top of Opec's target range of $22 to $28 a barrel.

The meeting is widely expected to agree that Opec's other members should increase their production to compensate for the Venezuelan shortfall.

Prices up

Saudi Arabia's Oil Minister, Ali al-Nu'aymi, said when he arrived here in Vienna, that there is now a shortage of oil.

The reason is the strike in Venezuela, normally Opec's third largest producer.

But its output has fallen by around four-fifths and the shortfall has driven prices up.

"I can tell you I support making sure the market is well-balanced," said Mr al-Nu'aymi.

"There will be no shortage of supply in the market when the market is well-balanced," he said.

Low stocks

The prospect of a deal to increase production has already brought prices down slightly, and an agreement could take crude oil back into Opec's target range.

But it will not lead to a sharp fall.

Stocks of oil in consuming countries are low, and there is always the prospect of a war in Iraq, which would push prices higher again.

It is only a few weeks since Opec agreed to cut production to prevent a feared price fall later this year.

That agreement reflected their mistaken belief that the strike in Venezuela would be very brief.