OPEC agrees to raise output to curb soaring prices: Report
Monday, January 13 2003 - 12:45 AM WIB
The 11-nation Organization of Petroleum Exporting Countries (OPEC) agreed to raise its combined output ceiling by 6.5 percent to 24.5 million bpd from next month to try to cool feverish world oil markets.
"We are trying to send a strong message to consumers that we are doing our utmost to stabilise the whole market," OPEC President Qatar Oil Minister Abdullah bin Hamad al-Attiyah said.
He said the Venezuelan crisis had taken over two million bpd of oil off world markets, adding that OPEC would roll back the output hike once Venezuelan exports recovered.
"We will respond very quickly when Venezuela reaches a quantity that will accommodate their market share," Attiyah said.
The quota increase is spread across the 10 OPEC members excluding Iraq, boosting Venezuela's ceiling to 2.82 million bpd, although Attiyah said the South American country was currently only producing 700,000 million bpd.
The new quotas also give top producer Saudi Arabia room to sell 488,000 more barrels of oil, with a quota rising to 7.96 million bpd and for the next largest producer Iran to sell 220,000 more barrels of oil with a quota of 3.6 million bpd.
The slump in Venezuelan exports has sent prices soaring above OPEC's 22-28 dollars per barrel target price.
Crude prices surged above 30 dollars a barrel in London, even reaching 33 dollars in New York recently, before easing back slightly.
Although high oil prices boost producers' revenues, OPEC is concerned that a price spike would jeopardise a global economic recovery and prompt consumers to switch to alternative sources of energy, thereby depressing oil demand.
Traders meanwhile are worried a US-led war in Iraq might be launched before the strike in Venezuela is resolved, depriving world oil markets of around five million barrels of oil per day from the two producers, or even more if the war were to destabilise other Middle East suppliers.
The United States has strategic oil reserves of 600 million barrels it can tap if necessary, but so far it has been reluctant to do so.
When asked whether OPEC would raise output further in the event of a war in Iraq, Attiyah replied, "For sure we'll meet again if there's a war and we'll discuss it and we will take the right decision.
"We will be very close to market and we will see if there is a big shortage for any reason," he said, but added that he was "optimistic" there would be no attack on Iraq.
Analysts said some OPEC members, notably Saudi Arabia which has the most spare production capacity, have already been producing above their individual quotas.
Raad Alkadiri, of the Washington-based PFC Energy consulting group, said "the (new OPEC) numbers correspond more to what OPEC is producing in response to the Venezuelan crisis than to any new production."
He said that while the new production "may take off some of the bullish pressure now on oil prices" there was still pressure as preparations for war against Iraq escalate.
Venezuela is "not the only issue out there," Alkadiri said.
Venezuela sent a beefed-up delegation including Oil Minister Rafael Ramirez and the president of state-owned oil company giant Petroleos de Venezuela (PDVSA), Ali Rodriguez -- a former OPEC secretary general -- to join the talks.
Rodriguez told reporters that the strike in Venezuela was "not a labour strike, this is a political conflict."
"The intention of these people is not to obtain benefits for workers but to defeat the government.
"Now, in the main cities and the main regions of our country the situation is normal," he added.
He said Venezuela was aiming to increase production to two million bpd as it fixed and regained control of refineries and other oil facilities.
Indonesia, Iraq, Kuwait, Iran and Libya did not send their ministers to the hastily called get-together, though they were still represented. (*)