3/28 7:03 OPEC to Resume Talks on Oil Production Increase (Update3)
By Stephen Voss, Joshua Schneyer, Alison Flint and Sean Evers
OPEC to Resume Talks on Oil Production Increase (Update3)
(Adds comment from Saudi Arabia in ninth, 10th paragraphs.)
Vienna, March 28 (Bloomberg) -- The Organization of Petroleum
Exporting Countries this afternoon will resume talks in a bid to
heed calls for more oil and overcome objections from Iran and
Libya.
A meeting will begin at about 5 p.m. in Vienna, an OPEC
spokesman said. Yesterday, the 11-nation group debated a Saudi
Arabia-backed plan to boost daily quotas by 7.4 percent, or 1.7
million barrels. Iran opposes a gain of more than 1.2 million,
said Saudi Arabian Oil Minister Ali al-Naimi.
The group wants to relax self-imposed output limits that
lifted oil to a nine-year high of about $32 a barrel earlier this
month. At the same time, OPEC seeks to keep a unity that came
after infighting sent prices below $10 in December 1998. Prices
were little changed today as traders awaited a result.
``It's important for them to come to an unanimous decision,'
said Bruce Evers, an oil analyst at Investec Henderson
Crosthwaite. ``Otherwise, they would send the wrong signal to the
market. If there are dissenters, that will open a possibility for
heavy cheating.'
OPEC wants to keep oil prices around $25 a barrel, while at
the same time respond to requests for more oil from the U.S.,
which represents one-fourth of world demand. Motorists there are
paying record-high gasoline prices of $1.50 a gallon, about 40
percent more than a year ago.
Crude oil for May settlement was little changed in London, up
17 cents, or 0.7 percent, at $25.85 a barrel. Still, prices are up
about 75 percent in the past year as OPEC agreed to restrain 4.32
million barrels of daily output.
An agreement may be reached later today or tomorrow morning,
oil ministers said.
`Hope'
``I hope, but I don't know' whether an accord can be set,
said Bijan Namdar Zanganeh, Iran's oil minister. ``Life is full of
compromises.'
Yet Iran, the second-largest oil producer within OPEC, is the
biggest obstacle to an agreement, said Al-Naimi, who represents
the world's largest oil producer. Yesterday, the minister said
there were ``no holdouts.'
Iran is ``against any form of output increase above current
production levels,' al-Naimi told reporters. ``The biggest
difference is between Iran and the rest of OPEC.'
While OPEC pumps two of every five barrels worldwide, higher
quotas may not necessarily mean an equivalent increase in
production.
The 10 members in OPEC participating in the output limits
currently exceed their quotas by about 1 million barrels a day.
How much additional oil OPEC produces will depend partly on
whether members exceed their targets, as they have under the
current accord, analysts said.
``If OPEC decides on a 1.5 million to 1.7 million barrel-per-
day increase, the decision would only have a psychological effect
on the market rather than actually producing real, extra
barrels,' said Ramsey Salman, an adviser to Qatar's oil minister,
in an interview.
The U.S. Department of Energy estimates that OPEC members,
excluding Iraq, must raise output to about 26 million barrels a
day to bring prices back to about $21, said Doug MacIntyre, a DOE
oil market analyst. That's 2 million above current actual
production, and 3 million above OPEC's current target.
Americans pay about one-third as much for gasoline as do
motorists in France.
Cheating
OPEC Secretary-General Rilwanu Lukman of Nigeria acknowledged
yesterday that members produced about 1 million barrels a day
above quotas in February, and even a rise of 1.7 million barrels a
day might do little to refill inventories.
Kuwaiti Oil Minister Sheikh Saud Nasser al-Sabah yesterday
said Persian Gulf nations are seeking an OPEC quota increase of
1.7 million barrels a day. Non-OPEC nations Mexico, Russia, Oman
and Norway could boost output by 300,000 barrels, he said.
The hesitation about a bigger increase by OPEC members such
as Iran reflects their concern that they have less to gain than
others from a boost in production, because they won't be able to
make up for a lower price with higher output, analysts said.
``There are a number of countries with no extra production
capacity, so you are asking them to lose revenue by agreeing to an
output increase,' said Roger Diwan, an analyst at Washington-
based Petroleum Finance Co.
For much of the past year, OPEC members have mostly adhered
to an output-limiting agreement negotiated last March, sending
world inventories plummeting and prices soaring three-fold from 12-
year lows in December 1998.
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