OPEC deal fails to keep lid on the barrel

www.theage.com.au January 15 2003

World oil prices rose yesterday, defying OPEC's decision to pump an extra 1.5 billion barrels a day, with traders concerned about the threat of an Iraqi war and a strike in Venezuela.

OPEC agreed at the weekend to increase production in an attempt to curb a surge in prices.

But underlying concerns about the situations in Iraq and Venezuela loomed large, as a large build-up of US forces pressed ahead and as oil-exporting Venezuela entered the seventh week of a crippling general strike.

New York's February-dated futures contract for light, sweet crude rose 58 US cents to $US32.26 a barrel.

In London, the February benchmark Brent North Sea crude oil futures contract advanced 53 US cents to $US30.20 a barrel. .

State-owned Petroleos de Venezuela (PDVSA) president Ali Rodriguez said on Monday that Venezuela aimed to increase production to two million barrels per day as it fixed and regained control of refineries and other oil facilities.

Analysts said OPEC's decision to lift production quotas had been widely expected.

Saudi Arabia's announcement that it could raise its own output if needed to 10.5 million bpd within two weeks, from a new quota of just under eight million, had only briefly lowered prices.

"The events of the weekend confirm a few suspicions and indicate that output is going to be above December levels, which I think is quite critical," said GNI analyst Lawrence Eagles in London.

"We've seen Saudi Arabia intimating that it had raised output prior to the meeting to offset the shortage to the United States," Mr Eagles said.

Saudi Arabia appeared to have chartered more tankers to the United States, indicating US deliveries were also set to rise next month, he said.

"What is clear is that Saudi Arabia, which is the pivotal player because of its spare capacity, is saying that it doesn't want to see prices rising further because it realises that would be detrimental to world economic growth," Mr Eagles added.

-AFP