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Monday, 2 September, 2002, 16:34 GMT 17:34 UK
Oil prices slip on Opec rumours
Tanker trucks at the Turkey-Iraq Habur border point, 16 August, 2002
Iraqi crude oil is smuggled into Turkey
Oil prices slipped on Monday amidst persistent whispers in the energy markets which suggest that the Opec cartel of oil producers is about to raise production levels to avoid a spike in prices this winter.

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The benchmark of the international energy market, Brent crude oil, fell 13 cents on Monday to $27.34 per barrel. The price of a barrel Brent crude has risen by a third since the start of the year.

Many of the world's top people in oil production and processing are currently meeting in Rio de Janeiro, attending the 17th World Petroleum Congress.

If Opec, or the Organisation of Petroleum Exporting Countries, decides to raise output when it meets in Osaka on 19 September, it will be its first such move in two years.

Oil production levels have already risen in Venezuela, which is pumping out 20% more oil than its quota allows.

In fact, in all the 10 Opec members participating in the system of production quotas, production is about 10% above what the quotas allow.

And in August, Russia, which not a member of Opec, saw oil flows reach its highest level since the fall of the Soviet Union.

Not decided

But a further rise in output is far from a foregone conclusion at next month's Opec meeting.

On Sunday, Opec President Rilwanu Lukman warned against tipping the oil market into oversupply by producing too much.

And on Saturday, Venezuelan President Hugo Chavez said a decision to raise output was unlikely at the cartel's next meeting.

Traders pinned their hopes on rumours that Saudi Arabia would press for a rise in order to utilise more of its spare production capacity and to mollify disgruntled Americans who want more cheap fuel.

"The Saudi's look to be in a minority in wanting an increase, but the Saudis usually get what they want in Opec," said Nauman Barakat of Fimat International Banque.

Playing it down

Saudi Arabia, which is the world's largest oil exporter, has responded by trying to quell such talk.

"Talking now about what decisions Opec will take during its next meeting is premature," said Saudi oil minister Ali al-Nuaimi.

"The process of amending the production ceiling and levels takes place at the meeting of the Opec ministers... based on the situation then," he said.

"The talk about a definite position by the kingdom [of Saudi Arabia] is not true."

Talk about oil prices, which have been pushed higher in recent weeks by the threat of a war against Iraq, is expected to hijack much of the informal agenda at this week's World Petroleum Congress.

Both Mr Lukman and Opec Secretary General Ali Rodriguez Araque are due to talk at the conference.

United Nations sanctions limit Iraq's oil exports, but more than 80,000 barrels of Iraqi crude oil are smuggled into Turkey each day.

Analysis of the oil market, OPEC, and the alternatives

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Analysis

Background
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29 Aug 02 | Business
27 Aug 02 | Business
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