OPEC calls emergency meeting

OPEC calls emergency meeting

Reuters, Dubai/Kuwait/London

OPEC producers on Wednesday called an emergency weekend meeting to decide how much more crude to pump to prevent a long- running strike in Venezuela and a looming war in Iraq causing an oil price shock.

The Organization of the Petroleum Exporting Countries (OPEC) said oil ministers will meet on Jan. 12 in Vienna after a 25 percent rise in prices in the past two months.

Kuwait's Oil Minister Sheikh Ahmad al-Fahd al-Sabah said ministers were discussing an increase of 1.0-1.5 million barrels per day, a rise of four to seven percent on limits now of 23 million bpd.

"There are two proposals. One million barrels per day and 1.5 million barrels a day," the minister told reporters in Kuwait. "We would favor raising by one million and would agree to 1.5 if necessary."

OPEC wants to bring prices back inside its US$22-$28 target band, a range it feels does not threaten world economic growth.

"The world has tried everything to boost growth without much success and if oil prices stay high we're in for another year of very slow growth," said Mehdi Varzi of Dresdner Kleinwort Wasserstein.

Oil has retreated from a peak of $33.65 a barrel for U.S. crude since the end of December when it was first revealed that OPEC was discussing a substantial output increase.

"They're trying to prevent panic on the oil markets. Most in OPEC are resigned to a war in the Gulf," said Varzi.

In Wednesday trade, U.S. crude eased another 73 cents to $30.35 a barrel and London Brent blend lost 73 cents to $28.60.

The cartel's most influential producer Saudi Arabia is pushing for a big increase while most other countries, including Kuwait, Algeria and Libya, prefer an addition of one million barrels daily.

The group, which pumps about 60 percent of world oil exports, wants to plug a 2.7 million bpd supply gap from Venezuela, where a strike against President Hugo Chavez is in its sixth week.

Loss of Iraqi supplies in the event of a U.S. military attack to oust President Saddam Hussein would remove another two million bpd from the 77 million bpd world market.

"It is a difficult situation we are in, since we are dealing with a market affected by a set of extraordinary circumstances that are beyond our control," said OPEC Secretary-General Alvaro Silva.

Many in OPEC already are pumping at, or close, to capacity. Only Saudi, the United Arab Emirates, Iran and Nigeria can add volumes among the 11 member group, Varzi said.

Shippers and oil company sources said Riyadh already has lined up more crude sales to the United States, Venezuela's largest customer.

Meanwhile in London, world oil prices extended losses on Wednesday as the OPEC cartel prepared to lift exports to cover a shortage from a prolonged strike in Venezuela.

International benchmark Brent crude oil fell 43 cents to US$28.90 per barrel by midday in London, bringing the week's drop to seven percent so far.

U.S. crude futures fell 39 cents to $30.69.