ARABS-OPEC - Jan. 7 - Cartel To Consider Raising Output.

A senior OPEC delegate says the cartel will hold an emergency meeting on Jan. 12 in Vienna to discuss raising oil production by up to 2m b/d. (OPEC has decided to pump more oil into the market because the general strike in Venezuela has brought that country's oil production to a virtual standstill and exports have shrunk to a trickle. The standoff, combined with fears in the oil markets that US attack on Iraq could disrupt oil supplies from the Gulf, have driven oil prices about 45% higher from year ago). The price of oil in London and New York fell sharply on news of a possible meeting. In London, the price of benchmark Brent crude oil for February delivery fell 87 cents, or 2.9%, to $29.33/b on the International Petroleum Exchange. In New York, the price of oil for February declined $1.02 cents, or 3.2%, to $31.08/b on the New York Mercantile Exchange. But despite the price drop, oil analysts and traders said additional oil exported by OPEC would not reach the US soon. As a result, they said, the price of oil in the US would continue to hover above $30/b - a level that may further dent an already-weak economic recovery. Philip Flynn of Alaron, a Chicago futures brokerage, said: "The global oil markets are losing 2-3m b/d because of Venezuela, so an increase by OPEC of about 1.5m b/d is still a far cry from what the markets need. It's a classic case of OPEC trying to jawbone the market down. And the market is believing it, because the market is a very, very fickle animal right now". Bloomberg News quoted an unidentified OPEC official as saying that Saudi Arabia, OPEC's top producer, backs an increase of 1.5-2m b/d, or 9%. But the increase may be only 1m b/d, a Qatari oil official said. Saudi FM Prince Saud Faisal said Riyadh favours increasing oil supply to force prices lower. Qatari Oil Minister and current OPEC Pres. Abdullah Hamad Attiya said in Doha that OPEC ministers were "still in consultation" on whether to increase output quotas and will decide by Jan. 14. (In Dec. 2002, the cartel agreed to lower output by 1.7m b/d to 23m b/d starting from Jan. 1. The strike in Venezuela has slashed the country's production to about 600,000 b/d from more than 3m b/d before the walkout). The OPEC officials said the measure to increase output would probably be temporary, possibly until OPEC's next regularly scheduled meeting on March 11.