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Wednesday, 18 September, 2002, 13:17 GMT 14:17 UK
Iraqi politics freezes oil cartel action
Acting oil minister for Kuwait surrounded by journalists
Opec ministers are under extreme pressure
Ministers from the oil producers' cartel Opec are due to decide how to control the world oil price on Thursday.

But the current political uncertainty surrounding Iraq is likely to render Opec members unable to take decisive action.

Iraq's deputy oil minister Sadam Hassan
Iraq's deputy oil minister refused to comment
The three-monthly Opec meeting could not have come at a more difficult time for the cartel leaders, who must agree how to adjust supply in order to sway oil prices.

The likelihood of an imminent war with Iraq has been changing rapidly over the past days, with mixed messages coming from Baghdad and Washington.

That, in turn, has caused wild swings in the oil price, which is highly sensitive to politics in the Middle East.

Price concerns

Opec ministers are now forced to guess whether US strikes against Iraq are imminent.

And comments from both ministers and experts already gathered in Osaka, Japan suggest that such uncertainty will mean Opec's oil output will be left unchanged.

Saudi Arabia's oil minister Ali Naimi
Saudi's oil minister is the most powerful member of the cartel
Opec aims to keep the price of crude oil within a range of $22 and $28 a barrel.

When the global economic slump caused a slump in oil prices last year, it cut back on production in order to lift the price.

Since January this year, it has kept its quotas on hold, and watched the oil price creep steadily higher.

Now, oil prices are ricocheting around between $27 and $30 a barrel, sometimes rising above the desired range.

That, together with the threat of a war, has placed pressure on Opec to increase the amount of oil it produces and ease the price back down.

Internal wrangling

The political uncertainties have also led to disagreement between member countries as to the best course of action.

Opec president Rilwanu Lukman
Opec's president must preside over any disagreements
Saudi Arabia, the most powerful member of the cartel, is thought to be keen to express its solidarity with the US by boosting output and lowering prices.

Nigeria also wants to increase production, but primarily because it is in desperate need of more revenue from oil in order to solve a budget squeeze.

But other states are fiercely opposed to raising production at a time when the oil price is volatile and could quickly fall if there is no war.

Expert believe the conflicting opinions within the cartel, together with the political situation, will cause the decision to be deferred, possibly to a new meeting in November.

See also:

13 Aug 02 | Business
13 Aug 02 | Business
17 Sep 02 | Business
16 Sep 02 | Business
17 Sep 02 | Middle East
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