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Mon, May 24, 2004 - Page 12 News List

OPEC delays decision on proposal to boost production

BLOOMBERG

OPEC plans to act next month on Saudi Arabia's proposal to lift the group's oil-output quota by 8.5 percent in an attempt to lower near-record prices.

At a meeting in Amsterdam yesterday, the organization's members delayed a decision until their official meeting in Beirut on June 3. Venezuela opposes raising the output ceiling and Iran, OPEC's second-largest producer after Saudi Arabia, expressed concern that prices might drop later in the year.

"In the current environment, disharmony in OPEC is supportive for prices," said Nauman Barakat, senior vice president at Refco Energy Markets in New York.

Oil prices have surged almost 40 percent in the past year, reaching a record of US$41.85 a barrel in New York last Monday. US Energy Secretary Spencer Abraham said he would seek assurances this weekend that OPEC, the source of more than a third of the world's oil, will boost supplies as rising fuel costs threaten to slow economic growth.

OPEC ministers, meeting informally in Amsterdam, said yesterday that oil prices are climbing for reasons beyond their control, including a lack of refining capacity in the US, political tensions, investor speculation and accelerating global demand.

Saudi Arabia said on Friday it would pump 8 percent more oil starting next month, boosting the kingdom's output to 9 million barrels a day. Oil Minister Ali al-Naimi also urged OPEC to increase its quota by at least 2 million barrels a day from 23.5 million.

The proposal came one day before the start of the International Energy Forum, a three-day gathering of more than 50 oil producing and consuming countries in Amsterdam. Ten days earlier, al-Naimi had suggested an increase of 1.5 million barrels a day. OPEC has said it's already exceeding its current limit by 2 million.

Venezuela, OPEC's third-largest oil producer, dismissed the need for a higher quota, saying the market has plenty of oil.

Rafael Ramirez, the Energy and Mines Minister, said he will seek an increase in OPEC's target price band for oil, now at US$22 to US$28 a barrel, at the June 3 meeting. The benchmark last stood at US$37.44.

"The era of cheap oil may be over," Ramirez said yesterday. "The price now is decided by many factors, not only OPEC."

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