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.