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Last Updated: Sunday, 10 October, 2004, 18:16 GMT 19:16 UK
Opec 'ready with spare capacity'
Opec's head office in Vienna
Opec says it is trying its best to stabilise prices
The oil ministers of Opec heavyweights Saudi Arabia and Kuwait have pledged to maintain output after prices hit new peaks at the end of last week.

But though they are maintaining spare capacity, they stressed bringing it onstream was unlikely to cool prices.

Prices are expected to come under renewed pressure on Monday as a four-day oil workers strike begins in Nigeria, Africa's biggest oil producer.

The head of Nigeria's main union body has been freed after a day in custody.

'Willing to do more'

Against the twin pressures of unabated high global demand and concern over supplies, US light crude ended the week at $53.31. In London Brent crude reached a record 49.75 before closing at $49.71 on Friday.

The problem is not Opec and production but international concern resulting from political factors
Kuwait oil minister Sheik Ahmed

Saudi Arabia is maintaining between 1.5 million and 2 million barrels a day of spare capacity, said Sheik Ali al-Naimi, the country's oil minister, at an energy conference in Abu Dhabi.

"My message to the world is there's no shortage, there'll be no shortage, and we are willing to meet demand as it rises," he said.

Kuwait's oil minister said his country could pump an extra 200,000 barrels a day.

Kuwait would support raising Opec's ceiling production quota by 1 million barrels of oil a day to 28 million if price rises did not slacken, said Sheik Ahmed Fahd al-Sabah.

WHAT OIL AT $50 A BARREL COULD MEAN FOR YOU
Higher prices for petrol and other fuel
Higher air fares
Higher costs for all companies, possibly leading to job losses
Higher retail prices as costs are passed on
Economic growth hit as consumer spending falls

But the impact of any such adjustment to formal quotas is likely to be limited as Opec countries are already outstripping them, pumping more than 30 million barrels of a day.

Opec's earlier promise to raise its official production ceiling to 27 million barrels from 1 November has failed to dent price rises.

Refiners need to make technical improvements to prevent waste, Opec ministers said. Saudi Arabia has 500,000 barrels a day of unpopular 'sour' crude which it cannot sell, while the United Arab Emirates is looking for ways to extract reserves with high gas content.

Political factors

"The problem is not Opec and production but international concern resulting from political factors," said Sheik Ahmed.

Supplies from the Gulf of Mexico are also still recovering as the region recovers from the recent spate of hurricanes.

With no sign of a let-up in demand and the ongoing unrest in Nigeria, some analysts now expect to see $60 a barrel within weeks.

"US oil prices will most likely be in the $60-70 price band next month," said Bruce Evers at Investec Securities in London.

World demand has increased dramatically because of China's economic boom, and an upturn in the US economy.

Oil refinery in Colombia
Refiners needs to improve techniques, says Opec

With spare production capacity reduced to a trickle, prices have been highly sensitive to any developments which could disrupt output.

The latest spike in prices has been fuelled by worries over strikes by oil workers in Nigeria and Norway, and by a drop in production in the Gulf of Mexico because of hurricane damage.

The oil market has also been underpinned by worries over security in the Middle East and sabotage in Iraq.

US crude prices are now up by more than 60% compared with the end of 2003, and analysts believe they may rise higher still.

"It's been a heck of a run, but nothing has changed fundamentally. We still have the same problems of limited supply and limited spare capacity," said John Brady at ABN Amro in New York.




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