Opec meets to ward off oil price shock

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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