OPEC cranks up oil production

abc.net.au Mon, Jan 13 2003 7:56 AM AEDT

An emergency meeting of Organisation of the Petroleum Exporting Countries (OPEC) ministers in Vienna has announced an increase in oil production of 1.5 million barrels a day.

The decision is aimed at calming an anxious market.

A strike in Venezuela and the possibility of war in Iraq two issues OPEC oil ministers were trying to untangle in a two-day meeting in Vienna.

Ongoing industrial action in Venezuela is denying the oil market some two million barrels a day.

That production shortfall and the threat of war in Iraq have sent prices above $US33 a barrel for the first time in two years.

OPEC leaders say the decision to increase production is a temporary one, to shore up supplies and take some of the heat out of prices.

Oil analyst Raad Alkadiri says OPEC had no other choice but to increase production and take the heat out of prices.

"Looking at it financially, obviously OPEC stands to benefit from higher prices," Mr Alkadiri said.

"But I think OPEC is also is trying to show - and Saudi Arabia in particular is trying to show - that their policy of an adequate price for both suppliers and consumers is something that they adhere to.

"They know that high prices cause political problems, they know that higher prices in the long term also cause economic problems."