DUBAI/KUWAIT, 9 January 2003 — OPEC yesterday called an emergency weekend meeting to decide how much more crude to pump to prevent a long-running strike in Venezuela and a looming war in Iraq causing an oil price shock. The Organization of the Petroleum Exporting Countries announced it will meet on Jan. 12 in Vienna after a 25 percent rise in prices during November and December.
Kuwaiti Oil Minister Sheikh Ahmad Al-Fahd Al-Sabah said the organization was discussing an increase of 1.0-1.5 million barrels per day, a rise of four to seven percent on limits now of 23 million bpd.
"There are two proposals. One million barrels per day and 1.5 million barrels a day," the minister told reporters in Kuwait. "We would favor raising by one million and would agree to 1.5 if necessary." OPEC wants to bring prices back inside its $22-$28 target band, a range it feels does not threaten world economic growth.
"The world has tried everything to boost growth without much success and if oil prices stay high we’re in for another year of very slow growth," said Mehdi Varzi of Dresdner Kleinwort Wasserstein.
Expectations for more OPEC oil already have knocked prices from their end-December peak of $33.65 a barrel for US crude, when it was first revealed the group was discussing a substantial output increase. "They’re trying to prevent panic on the oil markets. Most in OPEC are resigned to a war in the Gulf," said Varzi.
In the trade yesterday, US crude eased another 93 cents to $30.15 a barrel and London Brent blend shed $1.08 to $28.25 a barrel. The organization’s most influential producer Saudi Arabia is pushing for a big increase while most other countries, including Kuwait, Algeria and Libya, prefer an addition of one million barrels daily.
The group, which pumps about 60 percent of world exports, wants to plug a 2.7 million bpd supply gap from Venezuela, where a strike against President Hugo Chavez is in its sixth week.
Loss of Iraqi supplies in the event of a US military attack to oust President Saddam Hussein would remove another two million bpd from the 77 million bpd world market. "It is a difficult situation we are in, since we are dealing with a market affected by a set of extraordinary circumstances that are beyond our control," said OPEC Secretary-General Alvaro Silva.
Many in OPEC already are pumping at, or close, to capacity. Only Saudi Arabia, the United Arab Emirates, Iran and Nigeria can add volumes among the 11 member group, Varzi said.
Shippers and oil company sources said Riyadh already has lined up more crude sales to the United States, Venezuela’s largest customer. (R)
