Reuters, 12.30.02, 10:53 AM ET

LONDON, Dec 30 (Reuters) - OPEC is sure to raise oil output quotas by at least 500,000 barrels per day unless prices drop heavily in the next two weeks, a senior delegate from an OPEC nation said on Monday.

"The 500,000 barrels a day is sure. More than that is subject to ministerial consultations which are already underway," the delegate told Reuters.

An informal OPEC agreement stipulates that output be raised if prices for a basket of cartel crudes stay over $28 a barrel for 20 working days. The basket was priced at $31.06 on Friday, its ninth day over $28. Unless prices fall sharply it will have stayed over $28 for 20 working days by January 15.

Oil prices are running at two-year highs for fear of a war in Iraq and because of a four-week-old strike in OPEC member country Venezuela that has slashed its exports.

The OPEC delegate said oil ministers would not need to meet to raise output quotas by more than 500,000 bpd.

"If they want to do more than that they can agree the volume by phone," he said.

OPEC in December raised output quotas by 1.3 million barrels a day to 23 million bpd from January 1. Quota-busting means actual output has been running at some 24.5 million bpd.

Copyright 2002, Reuters News Service

Mon December 30, 2002 10:39 AM ET NEW YORK (Reuters) - Oil prices charged higher again Monday as traders bet on a U.S. attack against Iraq early next year and as supplies from OPEC nation Venezuela stayed choked off by a strike now in its fifth week.

U.S. light crude futures set a new two-year high in early trade of $33.45 a barrel up 73 cents from Friday. London Brent crude added 69 cents to $30.85 a barrel, a 15-month high.

"Oil and politics are a volatile combination and we have two separate issues confronting the oil market at the moment," said Peter Gignoux, head of the London energy desk at Schroder Salomon Smith Barney.

Oil has risen more than $5 in December and prices are now more than $10 higher than at the start of 2002. Concerns are growing that costly energy bills could stifle global economic recovery.

Washington at the weekend ordered more U.S. troops, aircraft and ships to head to the Gulf from January in preparation for a possible war against Baghdad.

Secretary of State Colin Powell said Washington had not yet decided whether to attack Iraq to force it to disarm weapons of mass destruction, but was taking "prudent action" in readiness.

Dealers think an attack could start soon after Jan. 27 when the chief U.N. weapons inspector Hans Blix delivers a report to the Security Council on the progress of his inspections teams.

U.S. defense officials said that Saudi Arabia had agreed to let the United States use its airbases and an operations center at the Prince Sultan airbase outside Riyadh for defensive purposes in the event of war.

But Saudi Foreign Minister Prince Saud Al-Faisal later said Riyadh had "no commitments" on Iraq.

CHAVEZ DEFIANT

In Venezuela, opposition leaders extended a nationwide strike into Monday, marking the 29th day of action aimed at forcing the resignation of President Hugo Chavez and early elections.

The strike has closed most oil production and refinery operations in the world's fifth-biggest exporter and choked off overseas sales to 15 percent of normal levels.

A tough-talking Chavez Sunday showed no sign of meeting opposition demands. Chavez in a nationwide broadcast said he had no plans to step down and vowed to break the strike.

Data from state oil firm PDVSA and independent shippers showed government efforts to break the strike helped boost oil exports to about 520,000 bbpd in the week to Dec. 29 compared with 260,000 bpd in the previous week.

Volumes remain way below November exports of about 2.7 million bpd.

The Organization of the Petroleum Exporting Countries, which controls two-thirds of world crude exports, has pledged to plug any supply shortfall due to the strike in Venezuela, the cartel's third biggest producer.

But so far officials have said there are no signs of any real shortage.

Kuwait said at the weekend that it expected OPEC to hold an extraordinary meeting to consider raising production if prices remained high.

"I can assure you that OPEC will meet if the price stays high," Kuwaiti Oil Minister Sheikh Ahmad al-Fahd al-Sabah told Reuters.

But Sheikh Ahmad said he had not yet been in contact with any other OPEC ministers about an emergency meeting.

Under an informal output mechanism, OPEC aims to keep the price of its reference basket of seven crude in a $22 to $28 a barrel range by increasing supply if prices exceed the upper end of the band for 20 consecutive trading days.

The OPEC basket jumped to $31.06 on Friday, the ninth day the reference price was above the target band. Unless prices drop sharply the 20-day target for the mechanism could be triggered in mid-January.

European benchmark Brent crude oil futures rose to a 15-month high of $30.70 a barrel Monday amid growing fears of a U.S. attack on Iraq and a continuing general strike in Venezuela.

"At the end of the day, it is pretty much as it has been for the past month the two driving factors being Iraq and Venezuela," said Orrin Middleton, oil analyst at Barclays Capital.

Two U.S. aircraft carrier battle groups, each with about 10,000 sailors and Marines, are within striking distance of Iraq. Two others were ordered last week to prepare for departure on 96 hours' notice, as were two amphibious warfare groups.

Meanwhile, oil exports from Venezuela, the world's fifth-largest oil producer, have plummeted to 340,000 barrels a day from 2.3 million barrels a day due to a crippling four-week strike.

At 12:52 GMT, Brent crude for February delivery was up 49 cents at $30.65 a barrel. The Brent crude price is not far off the Sept. 11, 2001 high of $31.05 a barrel.

Monday also saw highs in early electronic trade of U.S. crude futures on the New York Mercantile Exchange. February crude hit a new two-year high of $33.17 a barrel after smashing through the psychological barrier of $33 a barrel.

Over the weekend, Kuwaiti Oil Minister Sheik Ahmed Fahd Al Ahmed Al Sabah said the Organization of Petroleum Exporting Countries would consider meeting to discuss hiking output if oil prices remain high for a prolonged period, The Times of London reported Monday.

"I can assure you that OPEC will meet if the price stays high," the newspaper quoted him as saying.

Under OPEC's output mechanism, an increase in production can be triggered if the price of its benchmark basket of crudes remains over $22-$28 a barrel for 20 consecutive days.

The basket price has been above $28 a barrel for nine consecutive trading days.

Monday, December 30, 2002 Posted: 1014 GMT

LONDON, England -- Crude oil prices hit new two-year highs on Monday as concern grew over a possible U.S.-led attack on Iraq and a strike in Venezuela, the world's fifth-largest oil exporter, dragged on.

Brent crude oil for February delivery, the London benchmark, was up 44 cents to $30.60 in early trading.

The main U.S. oil futures contract was trading at $33.17 in after-hours electronic trading on the New York Mercantile Exchange. That is the highest level for crude since December 1, 2000.

"Iraq, North Korea, surging oil prices... [means] global equities will likely remain under pressure until war begins next year,'' Koichi Ogawa, chief portfolio manager at Daiwa SB Investments, told Reuters.

Oil prices soared after the arrival at the weekend of U.S. troops, aircraft and ships in the Gulf as preparations continue for a possible war against Baghdad.

The escalation of tension comes as U.N. weapons inspectors continue to search for evidence that Iraq has biological, chemical or nuclear weapons. (Full story)

At the same time, North Korea is being criticised for reactivating a nuclear power plant -- which is capable of producing enough weapons-grade plutonium to make two or three nuclear bombs per year -- and telling U.N. inspectors to leave the country. (Full story)

Fatal attacks in Chechnya and the West Bank on Friday added to global tension and concerns that any military action could disrupt oil shipments.

A month-old strike in Venezuela -- the world's fifth-largest oil exporter and a major supplier to the U.S. -- has also put upward pressure on oil prices.

Opponents of embattled President Hugo Chavez planned more protests against his government as Venezuela began importing petrol to break an oil workers' strike.

The first shipment arrived on Saturday from neighbouring Brazil. The move has enraged Chavez's opponents, who accused Brazil of interfering in Venezuela's internal affairs by helping the leftist leader to break the strike.

The strike has led to mile-long queues for fuel in Caracas and other cities. (Full story)

Tens of thousands hit the streets in Caracas on 28th day of strike ALEXANDRA OLSON Associated Press

CARACAS, Venezuela - Tens of thousands of people took to the streets demanding the resignation of President Hugo Chavez on Sunday, the 28th day of a nationwide strike that has virtually halted oil exports and evaporated domestic gasoline supplies.

The protesters poured out of nine areas of the capital to converge on an avenue chosen for its name: "La Victoria," or victory. Politicians, businessmen and labor leaders prodded the crowd with a long list of arguments why Chavez should quit.

It's a scene that has been played out many times during the strike -- so far without success.

Chavez refuses to go and insists the government is regaining control of the state oil monopoly, Petroleos de Venezuela, where most managers are on strike. He says he will use the protest to downsize the mammoth corporation and has already replaced many strikers.

"It's a struggle to save the country between us patriots and the traitors," Chavez said during his weekly television show, held Sunday outside a gasoline distribution center where the government has replaced striking managers.

At the rally in Caracas, his foes threatened more civil disobedience, including not paying taxes. Many also want to march on the presidential palace. The last time that happened, 19 people were killed in the clash between Chavez foes and followers. The April 11 violence provoked a coup that ousted Chavez for two days.