OPEC targets 5 percent output rise

OPEC targets 5 percent output rise

VIENNA (Reuters): OPEC oil ministers were gathering on Sunday to nail down the details of a pact that is expected to raise their crude exports by about 5 percent.

The Organization of the Petroleum Exporting Countries (OPEC) is set to seal the agreement at a conference starting here on Monday in an effort to ease high oil prices and avert an economic downturn in the oil importing nations of Asia and the West.

The producers are expected to bridge differences in opinion over how much extra they can afford to pump without sending international markets for their oil into a tailspin.

A senior Gulf official said on Saturday OPEC members were near a deal to lift crude output by between one to 1.5 million barrels daily, a senior Gulf official said on Saturday.

"We definitely are near an agreement to add between one to 1.5 million barrels a day," said the official, who is familiar with OPEC policy among Gulf producers.

The official said a recent reversal in oil prices to $28 a barrel in the U.S., from a peak of $34 two weeks ago, and likely leakage over official quotas, could mean the final decision would come closer to a million bpd than 1.5 million.

"Closer to one million will be more reasonable to all producers," he said. The incremental oil will come on top of official limits for 10 OPEC nations of 22.976 million bpd agreed last March, for an addition of about 5 percent.

OPEC delegates said recent contacts between Gulf OPEC leaders and U.S. President Bill Clinton had settled any last minute reservations about the output hike.

The Gulf official said the cartel was likely to agree to meet again in June to make a decision on whether additional volumes were needed to bring oil into the $20-$25 a barrel range that satisfies both Washington and OPEC.

Big producers, including Saudi Arabia, are believed to have made known they would like a reversal of about 1.5 million bpd of the 4.316 million bpd of output curbs in place for one year.

The limits expire at the end of this month.

Iran, until recently averse to any output rise, now says it would accept an addition of up to one million bpd.

"We expect to have between 700,000 to one million barrels a day output increase," a senior oil ministry official in Teheran said on Saturday.

Price hawks Algeria and Libya remain to be convinced that world oil inventories are low enough to warrant an increase.

Algerian Oil Minister Chakib Khelil said that the perception of more oil to come already had pushed prices down.

"An additional crude oil offer of between 1.2 million barrels per day and 1.4 million bpd on the top of quotas set in March, 1999, has already prompted prices to fall," Algeria's state news agency reported him saying in Algiers.

But arriving in Vienna later he said OPEC could count on Algeria's support if there was consensus for more oil.

In addition, Mexico, OPEC's main non-OPEC ally in limiting oil sales, said it will replace most of the output it withdrew a year ago.

Energy Minister Luis Tellez said in a interview published on Saturday that his country would phase in an extra 200,000-300,000 bpd. Mexico's capacity of 3.2 million bpd compares to current output of 3.05 million, so the move effectively will end any Mexican restrictions on exports.

Sanctions-bound Iraq, not a party to OPEC oil cuts, says it also is planning to raise exports in the next few weeks under its humanitarian exchange with the United Nations.

Iraqi Oil Minister Amir Rasheed told Reuters in an interview that a decision by the United Nations to release spare parts for Iraq's crumbling oil sector would allow Baghdad quickly to restore failing production.

Rasheed, in Jordan on route to Vienna, said Iraq soon would lift oil production by 700,000 bpd to 3.1 million bpd. That would allow 2.4 million for export after domestic consumption.

In London, U.S. Energy Secretary Bill Richardson said in earlier Friday that OPEC members looked likely to vote to increase oil production on Monday.

Speaking at a press conference Richardson said "It appears OPEC has agreed to increase production."

After a round of meeting with OPEC members, which included Algeria, Nigeria, Indonesia and the United Arab Emirates, Richardson said seven out of 10 OPEC members recognize a need for an oil increase.

"It's essential at the meeting they take action to correct the instability of oil prices," he said.

Richardson said he believes a "sizable" increase is needed, but wouldn't comment on specific numbers. "The market should dictate numbers," Richardson said.

Richardson said if U.S. President Bill Clinton believes OPEC's decision is not good for the U.S., there are a number of options open to him - and the release of Strategic Petroleum Reserve oil is one of them.