www.nytimes.com By ERIC PFANNER, International Herald Tribune

VIENNA, Jan. 12 — The Organization of Petroleum Exporting Countries agreed today to increase its official production quota in an effort to ease concern over tight global supplies and keep a lid on rising prices.

In an emergency meeting here, called to address the effects of anti-government strikes in Venezuela that have cut off most of that country's oil production, members of the cartel agreed to raise their total output quota to 24.5 million barrels a day as of Feb. 1.

"OPEC is trying to send a very strong message that it is doing the utmost to ensure adequate supplies," said Abdullah bin Hamad al-Attiyah, the OPEC president and Qatari oil minister.

Though the new quota represents an increase of 6.5 percent from the 23 million level set only a month ago, industry analysts said the actual amount of new oil that enters the market may be smaller, meaning any downward effect on prices could be muted. That is because the sensitive politics of the cartel required that every member will get a proportionately higher share, even though Venezuela's production will remain only a fraction of its official quota until strike-damaged facilities are repaired.

The only way that OPEC, which pumps about one-third of the world's oil, will be able to make up for Venezuela's lost share in the short term is if other members produce above their set limits, analysts said. In December, total OPEC production fell short of the 23 million limit by several hundred thousand barrels.

OPEC had sought to stamp out quota cheating at its December meeting, when it raised the official quota from 21.7 million barrels per day. But since then, the strikes in Venezuela against the government of President Hugo Chávez, along with concerns about a possible war in Iraq, have pushed prices sharply higher on world markets, throwing a monkey-wrench into those plans. On Friday, Brent crude oil for February delivery traded at $29.68 a barrel.

"It's hard to put Humpty Dumpty back together again," Gary N. Ross, chief executive of the PIRA Energy Group, an international energy consultancy in New York, said in reference to the effort to clamp down on quota cheating.

Analysts said the increase in the overall quota suggests that OPEC members that can pump more oil — only Saudi Arabia and the United Arab Emirates have significant spare capacity — will do so to some extent, even if their individual quotas are rising only marginally. Saudi Arabia's official level, for instance, rises to 7.96 million barrels a day from 7.48 million, but analysts say it could produce as much as 10 million barrels.

"There is no shortage," said Ali al-Naimi, the Saudi oil minister. "We never allowed the shortage to take place. There is a significant shortage from Venezuela, but there is no shortage in the international market."

If the official outcome of the meeting was less important than the reality of what happens in the market, then why would OPEC ministers gather in frigid Vienna — blanketed in nearly a foot of snow — only one month after their last regular meeting?

Appearances matter a great deal, too. Industry analysts said Saudi Arabia, in particular, was eager to be seen as cooperative at a time when many American conservatives are raising questions about the Saudi commitment to fighting terrorism.

Unusually high oil prices are not in Saudi Arabia's interest, if they contribute to a slowdown in the global economy and lower demand for the country's oil reserves, the largest in the world.

"They are trying to paint OPEC in a good light," said Leonidas P. Drollas, chief economist with the Center for Global Energy Studies in London. "The Saudis are trying to ingratiate themselves a bit with the United States."

But OPEC also emphasized that the increase in quotas may be temporary. If Venezuelan production returns to pre-strike levels and a war with Iraq is averted, for instance, the cartel might otherwise be faced with a price-depressing oil glut just as seasonal demand wanes in spring.

"We will look very closely at the market and we will continue our consultation," Mr. Attiyah said.

The OPEC president said he had faced no pressure from the United States, the world's largest oil consumer, to do something about rising prices. But he hinted that the possibility of a war in Iraq had figured in OPEC's discussions.

"We take all the factors into consideration in determining whether there is a shortage in the market," he said.

Iraq, which is nominally an OPEC member but outside the group's quotas because its production is monitored by the United Nations, stepped in to fill some of the gaps left by the loss of Venezuelan output. Over the last few weeks it has been producing about two million barrels a day, Mr. Drollas said.

The increased output from Iraq and quota cheating by other OPEC members probably accounts for United States petroleum stockpiles being above predicted levels in the week ending Jan. 3, actually rising by one estimate and falling less than expected by another. Though total OPEC production fell slightly short of the 23 million quota, the relative adequacy of supply helped push down futures prices slightly last week.

Though OPEC insists that it has enough spare capacity to make up for all of the lost production from Venezuela, a war in Iraq could upset the fragile supply-demand balance.

In the event of a war, analysts say the International Energy Agency would probably release some oil from its strategic reserves, held by 26 member nations. And the United States could tap its own Strategic Petroleum Reserve, as President Bill Clinton did in 2000 when prices spiraled.

business-times.asia1.com.sg January 13, 2003

Saudi Arabia says members are pumping more oil to replace lost Venezuelan output

(VIENNA) Members of the Organisation of Petroleum Exporting Countries (Opec) yesterday agreed to raise output at a special meeting in a bid to replace lost Venezuelan supplies and lower oil prices from close to two-year highs.

United Arab Emirates Oil Minister Obeid bin Seif al-Nasseri didn't provide details on the production increase, and further information wasn't immediately available.

Oil prices, now about US$30 a barrel, are expected by ministers to decline after the decision. Opec has a target range of US$22 to US$28 a barrel. Disruptions to Venezuela's exports and a possible war with Iraq boosted prices 44 per cent in London last year, the second-largest gain of the past two decades. Opec last week called its second meeting in a month, after crude oil prices in New York surged above US$33 a barrel.

Saudi Oil Minister Ali al-Naimi said members already are pumping more oil outside of their quota accord to replace lost Venezuelan output.

'There is no shortage. We never allowed the shortage to take place,' he told reporters earlier yesterday. 'There is a significant shortage from Venezuela, but there is no shortage in the international market.'

Saudi Arabia can increase production to more than 10 million barrels a day, from an estimated eight million barrels last month, within two weeks, the minister said. It would take 90 days to sustain supplies at 10.5 million, and the nation could go beyond that 'rather quickly', he said.

Ministers from Iraq, Libya, Kuwait and Iran didn't show up for the meeting yesterday. The Venezuelan government is struggling to maintain basic services as the six-week strike slows oil exports and production. Venezuelan oil production plunged by 2.3 million barrels a day in December to an average 700,000 barrels a day, according to Bloomberg estimates.

'We are increasing production,' said Ali Rodriguez, head of Venezuela's state-owned oil company, yesterday. 'Our objective is to reach a level in order to satisfy all our commitments to our customers.' He declined to give figures of the nation's output and said it's targeting a return to normal by the end of February. - Bloomberg

business-times.asia1.com.sg January 13, 2003

(OSLO) Oil tanker rates rose as companies and traders booked ships to carry oil from the Persian Gulf to the US at a faster pace to offset the halt in imports from strike-hit Venezuela.

A total of six very large crude carriers, or VLCCs, were booked for discharge in the US Gulf Coast as late as Feb 6, compared with two ships on Tuesday, R S Platou Shipbrokers AS said in note to clients. An additional 10 vessels were booked for discharge at Asian ports.

The 'situation is really worrying for US crude importers that normally take some 1.5 million barrels a day from' Venezuela, shipbroker Lorentzen & Stemoco said in a note. 'They have no choice other than approaching producers' such as Saudi Arabia and Kuwait to replace Venezuelan oil, it said.

Freight tariffs for two million-barrel supertankers, or VLCCs, measured in Worldscale points, an industry standard, rose to WS130 for cargoes of about 260,000 tons on the Persian Gulf to Japan leg, shipbrokers said. On Tuesday they were fixed as high as WS122.5, according to Bloomberg data.

Tanker demand has picked up as the strike in Venezuela, the fourth-biggest supplier to the US, is forcing oil companies and traders to book cargoes from other regions to cover their needs. The strike, now in its sixth week, is boosting utilisation rates of the crude oil fleet. The Organisation of Petroleum Exporting Countries may boost output to offset the loss of Venezuelan exports.

The VLCC market has 'rebounded strongly partially because of production increases by Middle East Gulf producers and also because of the vacuum created by the absence of Venezuelan crude in the market', shipbroker Fearnley's said in a market report.

Rates for one million-barrel ships, known as Suezmax tankers since they are the biggest to navigate the Suez Canal fully loaded with crude, rose 4.5 per cent to WS172.5 on the West Africa to US Gulf coast leg.

At Wednesday's rate levels, a modern VLCC will earn about US$70,000 a day, after deducting voyage-related costs such as fuel and port fees, analysts said. Frontline Ltd, the world's biggest operator of supertankers, had a break-even point of about US$21,000 in the third quarter for its VLCCs. - Bloomberg

sg.biz.yahoo.com Monday January 13, 4:13 AM By Fred Pals Of DOW JONES NEWSWIRES

VIENNA (Dow Jones)--Dealing with Venezuela right now but with Iraq in the background, OPEC at its extraordinary meeting in Vienna Sunday settled for a hike of its output ceiling by 1.5 million barrels a day to 24.5 million b/d, effective from Feb. 1.

ADVERTISEMENT And while the Organization of Petroleum Exporting Countries hopes supplies by strike-wracked Venezuela will gradually normalize and a U.S.-led war against Iraq won't materialize soon, the bottom-line is that OPEC wants the message out that it will make up for any loss caused by the Venezuelan crisis, analysts said.

On paper, Venezuela saved face with its new quota level under the terms of the pro rata hike across OPEC's 10 members, excluding Iraq. But it won't be able to meet its quota of 2.82 million b/d anytime soon.

"The deal is a nice finesse. It allows OPEC to make up for any shortfall and leaves Venezuela with the opportunity to say it is breaking a strike because it got a new quota," Raad Alkadiri, energy analyst at the Petroleum Finance Co. in Washington, said. It also avoids the troublesome issue of adjusting individual quota levels, Alkadiri added.

OPEC President Abdullah bin Hamad Al Attiyah added at the concluding press conference: "We have told Venezuela we won't take its market share."

Sunday's decision, he said, was aimed at ensuring "adequate supplies of crude to consumers and to restore balanced market conditions."

OPEC kingpin Saudi Arabia sided with the majority, although it had expressed earlier Sunday its concern of "flooding the market" if the ceiling was hiked. Sources hinted it had earlier sought an output rise divided between nine members, excluding Venezuela and Iraq, without changing the quotas.

Oil Prices Will Slip But Not By Much -Analysts

Given Venezuela's domestic crisis, most OPEC members think its supply won't return to its pre-strike 3 million b/d level any time soon. Venezuelan Oil Minister Rafael Ramirez and the head of state-run Venezuelan oil company Petroleos de Venezuela (E.PVZ), or PdVSA, Ali Rodriguez - a former OPEC President - set out to convince their colleagues that production of 2.5 million b/d would be reached in the country by mid-February. Al Attiyah just "hoped" Venezuela would reach that level. Venezuela, he said, was producing about 700,000 b/d currently.

Analysts have said it will take PdVSA months to get to 2.5 million b/d. A nationwide strike - which enters its seventh week Monday and is aimed at ousting President Hugo Chavez - has crippled operations at the oil giant and slashed production and exports to less than a third of their usual levels.

But despite OPEC's pledge to make up for any shortage caused by Venezuela, the prospect of war between the U.S. and Iraq means world oil prices won't come down much on Sunday's decision, analysts see. "I think it is dawning that war is to happen and prices will ease a bit but not a lot," Alkadiri said.

Yasser Elguindi, analyst with Medley Global Advisors in New York, agrees: "The market will take its time to let the message sink in there will be new barrels on the market. But prices won't ease significantly."

If a war against Iraq starts, a renewed OPEC pledge to make up for Iraqi shortfall, a timely release of U.S. strategic petroleum reserves and a seasonal downturn in consumption starting in the second quarter could quickly bring any price spikes under control, analysts said. Al-Attiyah made it clear that OPEC would meet in the event of war.

OPEC, he added, had more than 4 million b/d of spare capacity it could draw on if necessary. Iraqi production has been seen at slightly more than 2 million b/d. Global demand for OPEC output is seen at around 25 million b/d.

The issue from Monday, however, will be whether the crude oil price falls once the markets open. Many analysts say the move is, as so often the case at OPEC meetings, largely symbolic. That hike looks impressive on paper, yet much of it is accounted for by OPEC's rising pool of quota-busting.

If analysts are proven right over the next couple of months and oil prices remain stubbornly high, then this weekend's emergency meeting will, arguably, have failed to achieve OPEC's immediate goals.

OPEC's next regularly scheduled meeting is slated for March 11.

-By Fred Pals, Dow Jones Newswires; 0043-664-5446851; fred.pals.dowjones.com

www.wgrz.com

VIENNA, Austria (AP) -- OPEC members agreed Sunday to boost the cartel's oil production target by 6.5 percent to cover a shortfall in crude exports from Venezuela.

The increase of 1.5 million barrels a day would take effect on Feb. 1, OPEC President Abdullah bin Hamad Al Attiyah told a news conference.

The Organization of Petroleum Exporting Countries announced the increase in the hope of calming fears of a supply crunch caused by an ongoing strike in Venezuela. The strike, launched Dec. 2 by political opponents seeking to oust President Hugo Chavez, has slashed the country's exports by about 2 million barrels a day. Venezuela, a major supplier to the United States, is normally the world's fifth-largest oil producer and the third largest in OPEC.

"OPEC is trying to send a very strong message that it will do its utmost to stabilize demand and supply," Al Attiyah said after delegates reached their decision in informal talks.

"Now we will wait for the market to react," he said.

OPEC's new production ceiling is 24.5 million barrels a day. The group would review its decision when it meets again in March, Al Attiyah said.

OPEC pumps about a third of the world's crude supplies, which total 79 million barrels a day.

The output hike was at the upper end of what analysts had expected. It appeared to contradict Saudi Arabian Oil Minister Ali Naimi's comment earlier in the day that the ceiling should remain at 23 million barrels a day. Saudi Arabia is OPEC's most influential member, and it has the bulk of the cartel's spare production capacity.

Crude prices surged in recent weeks but fell sharply in anticipation of OPEC's boosting production. Fears about a possible U.S.-led war against Iraq have added upward pressure to world oil prices. Iraq has the second-biggest oil reserves after Saudi Arabia, and there has been a steady buildup of U.S. troops in the Persian Gulf.

On the New York Mercantile Exchange, February contracts of light, sweet crude futures fell 31 cents Friday to close at $31.68. On London's International Petroleum Exchange, February Brent crude ended at $29.67 a barrel, up 3 cents.

Al Attiyah confirmed that OPEC's price target remains $22 -$28 per barrel of its benchmark blend of crudes.

The suddenness of OPEC's decision to call this meeting reflects its surprise at the deterioration in market conditions. Oil ministers for four of the group's 11 members were unable attend due to prior commitments.

A fifth minister, Libya's Abdulhafid Mahmoud Zlitni, was due to arrive Sunday but canceled his trip because a sandstorm prevented his plane from leaving the Libyan capital, Tripoli.