- The Washington Times - Sunday, January 12, 2003

VIENNA, Jan. 12 (UPI) — OPEC said Sunday its members had agreed to boost oil production targets by 6.5 percent to 24.5 million barrels a day.

The oil cartel's decision was prompted by a shortfall in oil exports from Venezuela, which has been hit by protests against President Hugo Chavez.

OPEC President Abdullah bin Hamad Al Attiyah said the decision would take effect Feb. 1.

The Organization of Petroleum Exporting Countries will now increase its production by 1.5 million barrels a day, Saudi Oil Minister Ali al-Naimi said.

Oil prices have hit about $30 a barrel following a cut in supply from Venezuela, which has been hit by a nationwide general strike against Chavez, and a possible U.S. war on Iraq.

Last week, crude prices in New York hit above $33 a barrel.

Al-Naimi said OPEC members were pumping more oil to replace the shortfall caused by Venezuela.

"There is no shortage," he said. "We never allowed the shortage to take place.

"There is a significant shortage from Venezuela, but there is no shortage in the international market."

A six-week strike in Venezuela has hit oil production and other sectors of the economy.

The 11-nation OPEC controls 80 percent of the world's oil reserves, but pumps one-third of global supply.

OPEC increased its quota by 1.3 million barrels to 23 million barrels per day beginning Jan. 1, and another boost could leave the cartel vulnerable to being caught on the proverbial limb in the form of a saturated market if the political situation in Venezuela is sorted out and the state oil company, PDVSA, resumes full production.

The increase is not an arbitrary decision. OPEC has a mechanism in place that is based on an average price of $22-$28 per barrel for a "basket" of various crude varieties produced by member nations.

If the price slips below the $22-$28 price band for 20 consecutive days, production is reduced accordingly. If the price goes above the band, production is increased. OPEC said its basket price topped $30 per barrel last week and was $30.71 last Monday.

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