OPEC raises output

www.theage.com.au Monday 13 January 2003, 07:30AM

The OPEC oil cartel agreed Sunday to increase oil production by 1.5 million barrels per day (bpd) in a bid to curb a surge in prices triggered by a strike in Venezuela and the threat of war in Iraq.

The 11-nation Organisation of Petroleum Exporting Countries (OPEC) agreed to raise its combined output ceiling by 6.5 per cent to 24.5 million bpd from next month to try to cool feverish world oil markets.

"We are trying to send a strong message to consumers that we are doing our utmost to stabilise the whole market," OPEC President Qatar Oil Minister Abdullah bin Hamad al-Attiyah said.

He said the Venezuelan crisis had taken over two million bpd of oil off world markets, adding that OPEC would roll back the output hike once Venezuelan exports recovered.

"We will respond very quickly when Venezuela reaches a quantity that will accommodate their market share," Attiyah said.    advertisement       advertisement

The quota increase is spread across the 10 OPEC members excluding Iraq, boosting Venezuela's ceiling to 2.82 million bpd, although Attiyah said the South American country was currently only producing 700,000 million bpd.

The new quotas also give top producer Saudi Arabia room to sell 488,000 more barrels of oil, with a quota rising to 7.96 million bpd and for the next largest producer Iran to sell 220,000 more barrels of oil with a quota of 3.6 million bpd.

The slump in Venezuelan exports has sent prices soaring above OPEC's 22-28 dollars per barrel target price.

Crude prices surged above 30 dollars a barrel in London, even reaching 33 dollars in New York recently, before easing back slightly.

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.