OPEC agrees to increase oil production

Jan 13, 2003 01:00 AM

An emergency meeting of OPEC agreed to increase oil production, easing fears of another jolt to the world economy and a rise in petrol prices. Despite the absence of oil ministers from five of its 11 member states, OPEC agreed to raise production by 7 %, about 1.5 mm bpd, to 24.5 mm barrels.
“We are trying to send a strong message to consumers that we are doing our utmost to stabilise the whole market,” said Abdullah bin Hamad al-Attiyah, OPEC’s President, and Qatar’s Oil Minister. The cartel’s hand was forced by a strike in Venezuela, the world’s fifth largest oil producer, which has cut the country’s exports by 2 mm bpd.

The strike, started by opponents of President Hugo Chavez on December 2, shows no sign of abating and, along with fears of war in Iraq, has pushed oil prices up to more than $ 30 per barrel. Venezuela is also a big supplier to the US. Mr al-Attiyah said OPEC’s price target remained at $ 22 -$ 28 per barrel, and that OPEC had come under no pressure to approve a large rise in production. “I never received any calls from anyone,” he said.
The rise in production will only partly compensate for the Venezuelan shortfall, however, and the threat still remains that industry could see a big rise in its energy costs. OPEC wants to prevent the price rising to levels that could harm world economic growth and reduce crude demand. It is also aware that the additional barrels could reach the markets as seasonal demand starts to weaken in the spring.

Traders fear that military action against Iraq could be launched before the Venezuelan strike is resolved, depriving the world of 5 mm bpd from the two countries. Iraq has the world’s second biggest oil reserves.
Saudi Arabia, whose output quota is 7.5 mm bpd, stands to gain most from any production rise. Ami Naimi, its Oil Minister, said it could lift its output to 10 mm barrels within two weeks. He said the United Arab Emirates, Kuwait, Nigeria and Algeria, also had spare capacity. The increase in production takes effect from February 1.

Source: Times Newspapers Ltd.
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