OPEC to Boost Daily Output by Less Than 2 Mln Barrels

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Top Financial News Mon, 27 Mar 2000, 11:55am EST OPEC Will Boost Daily Crude Oil Production by No More Than 8.7% in April By Stephen Voss, Joshua Schneyer, Alison Flint and Sean Evers

OPEC to Boost Daily Output by Less Than 2 Mln Barrels (Update2)

(Adds Saudi oil minister comment in seventh paragraph.)

Vienna, March 27 (Bloomberg) -- OPEC members support a plan to increase crude oil output quotas next month by no more than 2 million barrels a day, or 8.7 percent, a boost traders said was too little to relieve consumers of high energy prices.

All 11 members of the Organization of Petroleum Exporting Countries back such a gain, United Arab Emirates Oil Minister Obeid bin Seif al-Nasseri said. Persian Gulf states have proposed an OPEC increase of 1.7 million barrels a day, said Kuwait's Oil Minister Sheikh Saud Nasser al-Sabah, and another 300,000 barrels daily may come from non-OPEC Norway, Russia, Oman and Mexico.

By limiting the addition, the group wants to keep oil prices around $25 a barrel, more than double the $9.55 reached in December 1998. As a result, motorists and companies from chemical makers such as Lonza AG to airlines such as US Airways Group Inc. will continue to suffer from high energy costs, traders said.

The plan could ``support prices for the next three months or so,'' Chan Hean Kheong, a crude oil trader with Caltex Corp., a joint venture between Texaco Inc. and Chevron Corp. ``Whether prices will fall further in the next few months will also depend on OPEC's ability to comply'' with the accord.

The increase being discussed falls shy of the 2.3 million barrels a day that the International Energy Agency says is needed to rebuild worldwide inventories, which have fallen to the lowest level in 10 years after OPEC last year agreed to remove 4.32 million barrels of daily output.

Oil ministers plan to begin an official meeting at around 6 p.m. local time in Vienna. Iran said the group may announce an accord today or tomorrow to revise OPEC's quota of 22.98 million barrels a day for its 10 members who are in the agreement. ``There are no holdouts,'' said Ali al-Naimi, oil minister for Saudi Arabia, the world's largest oil producer.

Net Gain

By using current quotas as a base, the accord may add only 1 million barrels of daily output because OPEC is already pumping about 1 million barrels more than targeted.

With additional oil on the way, benchmark Brent crude oil for May settlement was down 28 cents after dropping as much as 53 cents, or 2.1 percent, to $25.38 a barrel on the International Petroleum Exchange in London. ``The slight decline shows the market being cautious ahead of the meeting,'' said John Cairns, an economist with IDEAglobal.com in Singapore. ``If OPEC agrees to increase output between 1.5 and 1.7 million barrels a day, it'll be well within market expectations.''

Oil shares in Europe declined as investors expected the peak in oil prices passed earlier this month near $32 a barrel in London. BP Amoco Plc lost 28 pence, or 5.2 percent, to 513.5p in London, while Total Fina Elf SA shed 3.1 euros, or 2.2 percent, to 137.6 euros in Paris.

OPEC may meet again in June to review its accord, rather than waiting for September and its next semiannual gathering, though such a meeting would depend on oil prices, ministers said.

Not all OPEC officials have publicly supported an increase. Libyan Oil Minister Abdalla Salem Al El-Badri said today he was ``concerned about the season'' and an expected drop in demand.

Allies

Mexico, which is not a member of OPEC, plans to increase output on April 1 by 200,000 to 300,000 barrels a day, Mexican daily Excelsior reported, citing an interview with Oil Minister Luis Tellez. Jorge Chavez, Mexico's deputy energy secretary, declined to comment as he arrived in Vienna yesterday.

Russia has yet to decide its oil policy, said Fuel and Energy Minister Viktor Kalyuzhny, who added that OPEC may not need to raise production. ``Do you see any gas stations suffering from a lack of fuel in Europe?,'' he said. ``There are enough oil products in the market. We don't see the necessity to produce an oversupply.''

The U.S. government, now in a presidential election year, has been urging oil producers for greater supplies as U.S. motorists pay a record $1.529 a gallon for gasoline. U.S. Energy Secretary Bill Richardson has met officials from most OPEC countries in the past two months to discuss high oil prices.

Some OPEC officials said any accord would be based on the market's needs rather than political pressure.

``For us, it involves an intelligent managing of the market,'' said Ali Rodriguez, oil minister for Venezuela, who declined to comment on discussions underway. ``In the case of Venezuela, political considerations aren't influencing the decision

http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial%20News&s1=blk&tp=ad_topright_topfin&T=markets_bfgcgi_content99.ht&s2=blk&bt=blk&s=e0b291b894be63bf43f2b1a53c4e1449



-- Martin Thompson (mthom1927@aol.com), March 27, 2000


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