Some at OPEC considers boosting production to offset uncerainty in Venezuela, Iraq

www.cbc.ca 11:16 AM EST Jan 12 BRUCE STANLEY

VIENNA, Austria (AP) - OPEC needs to compensate for a shortfall in oil exports from Venezuela, but it shouldn't change its official output target of 23 million barrels a day, the group's most influential oil minister said Sunday.

An increase in the target ``would really flood the market,'' Saudi Arabian Oil Minister Ali Naimi said ahead of an emergency meeting the Organization of Petroleum Exporting Countries planned later in the day at its headquarters in Vienna.

OPEC called the meeting last week hoping to calm fears of a supply crunch caused by an ongoing strike in Venezuela. The strike, launched Dec. 2 by political opponents seeking to oust President Hugo Chavez, has slashed the country's exports by about 2 million barrels a day. Venezuela is normally OPEC's third-largest producer and a major oil supplier to the United States.

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

Naimi acknowledged that the Venezuelan strike has deprived the market of crude. ``I care about what the market needs,'' he said.

But while he added that OPEC's production ceiling of 23 million barrels a day should remain unchanged, Naimi 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.

Saudi Arabia accounts for the bulk of the group's spare production capacity and would stand to gain from any such temporary adjustment of output quotas within the overall target. Saudi Arabia's current output quota is 7.5 million barrels a day, but Naimi said his country could boost daily production to 10 million barrels within two weeks.

Still, OPEC members worry that if they do raise production, the additional barrels might hit markets just as seasonal demand starts weakening in the spring.

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. An unspoken concern was that any reallocation of quotas to end the shortfall might take some of the external pressure off Venezuela's opposition to end its strike.

Fears of a possible U.S.-led war against Iraq have added upward pressure to world oil prices. Iraq has the second-biggest oil reserves after Saudi Arabia, and there has been a steady buildup of U.S. troops in the Persian Gulf.

Crude prices surged in recent weeks but fell sharply in anticipation of OPEC's boosting production. On the New York Mercantile Exchange, February contracts of light, sweet crude futures fell 31 cents Friday to close at $31.68. On London's International Petroleum Exchange, February Brent crude ended at $29.67 a barrel, up 3 cents.

OPEC's price target is $22-$28 per barrel of its benchmark blend of crudes.

OPEC sources have said the Saudis were proposing to increase the group's daily output by 1.5 million barrels. Other members, including Algeria and Libya, have favored a smaller increase of 1 million barrels.

``We have to see what quantity is required,'' said Obaid bin Saif Al-Nasseri, oil minister for the United Arab Emirates, said late Saturday as he arrived at a Vienna hotel.

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.

Any increase would take effect Feb. 1, Al Attiyah said. That means American importers would not see any fresh crude until at least mid-March because Saudi shipments take at least 40 days to reach U.S. ports.

The suddenness of OPEC's decision to call this meeting reflects its surprise at the deterioration in market conditions. Oil ministers for four of the group's 11 members were unable attend due to prior commitments. A fifth minister, Libya's Abdulhafid Mahmoud Zlitni, was unable to arrive Sunday because a sandstorm prevented his plane from leaving the Libyan capital, Tripoli.