Opec prepares output hike

economictimes.indiatimes.com PTI[ SUNDAY, JANUARY 12, 2003 08:50:38 PM ]

VIENNA: Opec energy ministers called on Sunday for an increase in oil production to make up a shortfall of two million barrels per day from strike-hit Venezuela in a bid to stop spiralling oil prices.

The 11-nation Organization of Petroleum Exporting Countries needs to raise oil output by that amount to cover the shortfall from Venezuela, where a six-week old strike has crippled production, Algerian Oil Minister Chakib Khelil said.

"I think we're going to raise" production, he said as Opec began an emergency meeting in Vienna. "We need two million" barrels per day more, he added.

But the exact amount was not clear, particularly since many Opec members are already thought to be producing above their individual output quotas.

The supply squeeze has nevertheless sent prices above Opec's $22-$28 per barrel target price. Crude prices surged above 30 dollars a barrel in London, even reaching $33 in New York recently before easing back slightly.

In addition, traders are worried 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.

Saudi Arabian Oil Minister Ali al-Nuaimi said here that Opec would probably leave its overall output quota unchanged at 23 million barrels per day (bpd), while making up the shortfall from Venezuela.

Seeking to calm jittery markets, Nuaimi said Saudi Arabia would ensure there was adequate supply and could raise its own output if needed to 10.5 million bpd within two weeks, from a quota of 7.5 million.

"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 added.

Analysts say some Opec members, notably Saudi Arabia which has the most spare 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.

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.