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Friday, 10 January, 2003, 23:16 GMT
Opec to tackle high oil price
Oil worker
The key question is how drastic the increase should be
How to bring down high oil prices is on top of the agenda at an emergency meeting of Opec, the cartel of the world's leading oil producers, in Vienna on Sunday.

Sources say that the Organisation of Petroleum Exporting Countries is almost certain to agree higher production quotas, but its members are still haggling about the exact quantities.

Opec members
Saudi Arabia
The meeting comes exactly one month after the cartel angered consumer countries by agreeing to slash its output.

Since then, oil prices have soared to above $30 a barrel, driven up by the political turmoil in Venezuela, which has paralysed the country's energy industry.

A possible war with Iraq also threatens to disrupt supplies from the Middle East, putting further upward pressure on prices.

Controlling power

The 11 Opec members aim to keep the price of crude oil between $22 and $28 a barrel by controlling the amount of oil they release into the global marketplace.

The oil price has now been above this level for the past 20 days and the cartel's self-made rules mean it is now time to raise production.

But the agreement is only voluntary, and many countries are already exporting more than the agreed amount in order to cash in on higher prices.

And some members fear that the over-production will continue even if an official output increase is agreed, eventually causing a sharp price crash.

Compliance trouble

Ahead of the meeting, several ministers stressed the importance of sticking to the agreed quota.

Opec's basket price is an average of the prices for:
Saudi Arabia's Arab Light
The United Arab Emirates' Dubai
Nigeria's Bonny Light
Algeria's Saharan Blend
Indonesia's Minas
Venezuela's Tia Juana Light
and Mexico's Isthmus.
"Any irregularities and lack of coordination among oil producing countries will result in sharp fluctuations of prices in the energy sector, and the oil producing countries will be the final losers," said Iranian president Mohammad Khatami.

Venezuela's embattled president Hugo Chavez has also stressed the importance of collaboration amongst both Opec and non-Opec members in pumping more oil.

US oil stocks are almost at their lowest level for 26 years - a potentially worrying situation for a country about to go to war.

Wild prices

Opec oil ministers had been discussing how big the increase should be over the telephone.

But differing stances meant that a formal meeting was necessary.

Saudi Arabia is thought to be pressing for a substantial cut of 2 million barrels a day, whereas other members fear this could be too drastic.

And Kuwait's acting oil minister has said that an increase of 1 million barrels a day would be sufficient to bring prices down.

Opec may also want to call on help from non-Opec members like Mexico and Norway, although the latter has already warned that it is already producing at maximum capacity.

On the oil markets, prices showed little change on Friday.

In London, Brent crude oil contract traded $0.03 higher at $29.67 a barrel.

In New York, the benchmark Nymex contract ended $0.31 lower at $31.68 a barrel.

Nick Van Der Vell, Petroleum Industries Association
"The crude market is notoriously difficult to read"
Analysis of the oil market, OPEC, and the alternatives

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See also:

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