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Last Updated: Sunday, 16 May, 2004, 15:10 GMT 16:10 UK
Support grows for oil output rise
Oil well
Producers insist they are struggling to keep the market calm
Pressure is growing on members of the oil cartel Opec to boost output in order to curb soaring price rises.

Iran is giving guarded support to calls made a week ago by Saudi Arabia for an extra 1.5 million barrels a day.

Opec will meet on Friday to discuss the situation, after the cost of crude oil leapt to all-time highs of more than $41.50 a barrel in New York.

But any boost may simply be absorbed by members' massive overproduction, limiting the effect on prices.

Figures released on Saturday by the Middle East Economic Survey suggest the cartel's 11 member states are currently pumping almost 26 million barrels a day, against an Opec quota of 23.5 million barrels.

Overproduction is admittedly routine, which may well mean that producers are already close to capacity.

Trouble

The pressure from oil consuming nations for an increase in output is prompted by concern that the high price could spell trouble for economic growth.

Petrol lorry
The current surge is not just to do with consumption
The current level - which touched $41.56 at one point on Friday - exceeds even the price reached during the 1991 Gulf War.

The combination of tight supplies and fears about security - both in Iraq and elsewhere - are combining to keep prices high.

On the one hand, demand from China has spiralled skywards as a result of its breakneck boom, while Western countries such as the US are also sucking in more supplies.

On the other hand, Iraqi flows continue to be disrupted by attacks on oil facilities, while the recent killing of six oil workers in Saudi Arabia - five of them foreigners - has also spooked the markets.

No fault

These developments mean Opec members are insistent that they should not be blamed for the trouble high prices could cause.

"A possible increase of Opec production... would display the organisation's co-operation and understanding with consumers even though Opec is not responsible," said Iran's Opec governor, Hossein Kazempour Ardebili, on the state oil company's website.

And earlier this week, Qatari oil minister Abdullah al-Attiyah - who believes a shift in output is likely - told Reuters that supply was not the key issue.

"The market today is not under a shortage of supply but... mainly under fear pressure," he said.


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