Oil hike 'linked' to politics

www.theage.com.au Sunday 2 February 2003, 10:30AM

OPEC President Abdullah bin Hamad al-Attiyah said the rise in crude oil prices was linked to regional political developments and that the cartel could do nothing to contain them.

"The rise is due to political developments in the region and psychological factors on the market, and OPEC can do nothing to contain it," said Attiyah, Qatar's energy and industry minister, on the sidelines of an energy and environment conference in Abu Dhabi.

Attiyah said the cartel raised its oil production ceiling to 24.5 million barrels per day (bpd), in accord with a decision taken on January 12, in a bid to ensure adequate supplies of oil and restore balanced market conditions.

The production ceiling was previously 23 million bpd, and the decision was taken to compensate for the drop in oil exports from Venezuela, paralysed by an enduring strike in its oil sector.

Attiyah warned oil prices could nose dive if a US-led war against Iraq breaks out, but added that if Venezuelan production came back to its former levels it would contribute to price stability.

He noted that during the 1980-1988 Iran-Iraq war and 1991 Gulf war "prices rose to $US40 ($A68.05) per barrel before dropping quickly to $US10 ($A17.01), even $US7 ($A11.91)."

Attiyah said last week that the cartel could cut production following a planned meeting in March because of an expected production surplus.

On Friday, New York's light sweet crude March-dated futures were priced $US33.51 ($A57.01) a barrel, well above the $US22 ($A37.43) to $US28 ($A47.64) per barrel OPEC price band.

In London, the price of benchmark Brent North Sea crude oil for March delivery was $US31.06 ($A52.84) per barrel.