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OPEC members virtually rule out supply increase

OPEC has virtually ruled out pumping more oil to ease record-high prices, key oil ministers signaled yesterday on the eve of a cartel meeting.

OPEC president Chakib Khelil said the 13-nation group is shying away from boosting production because of the US economic slowdown, political turmoil in the Middle East and expectations of slackening global demand for crude.

On Monday, oil surpassed the all-time record of US$103.76 a barrel when adjusted for inflation. The previous record was US$38, set in 1980 at the height of the US-Iran hostage crisis. Oil held steady well above US$102 in Asia trading yesterday after nearly hitting US$104 a day earlier.

"Because of the economic slowdown in the United States -- which is affecting world economic growth and world demand on oil this year -- I don't think OPEC will consider increasing its production," Khelil told reporters. "Stocks are very high ... and we are going to have less demand in the second part of the year."

Pressure has mounted on OPEC to raise output, which would put more crude on the market and help pull down prices which have been holding above US$100 for weeks.

But the group contends that there is an ample supply of crude, and since demand typically eases in the second quarter, it was widely expected to take no action at today's meeting in Vienna.

"Politically, OPEC should increase output. But I think what they will actually do is nothing," said John Hall, of John Hall Associates in London.

Hall said one option would be to authorize Khelil to order an output increase or decrease in the coming weeks -- a gesture that would reassure jittery oil markets. OPEC's advisory committee, which makes recommendations to the entire cartel, planned to meet yesterday afternoon.

Khelil held open the possibility of some kind of intervention, saying: "I think we will wait for the meeting."

He spoke after talks with Saudi Arabian Oil Minister Ali Naimi, OPEC's No. 1 producer and most influential member.

Kuwait and Libya are among OPEC members who have said the cartel should maintain its current output, estimated at about 29.7 million barrels a day -- roughly 40 percent of daily world demand.

However, Iran and Venezuela -- both hawkish on prices -- have pressed for a cut in output. Analysts said it was doubtful that the rest of OPEC would go along with that, since it would push prices even higher in the short term.
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