- The Washington Times - Sunday, January 12, 2003

VIENNA, Jan. 13 (UPI) — The Organization of Petroleum Exporting Countries, OPEC, Sunday announced an increase of 7 percent to overcome the shortfall caused by an ongoing strike in Venezuela and a possible U.S. war against Iraq.

OPEC President Abdullah bin Hamad Al Attiyah told reporters after a four-hour meeting that the increase in production will take effect Feb. 1. OPEC will now increase its production by 1.5 million barrels a day.

"Now we will wait for the market to react" said Al Attiyah. "It is a strong message from OPEC that it will do its utmost to stabilize demand and supply."

An OPEC statement said Sunday's decision was aimed at ensuring adequate supplies of crude oil to consumers and restoring balanced market conditions.

The hurried decision to raise oil production was taken to calm international fears of a major crude oil shortage due to the strike in Venezuela that began Dec. 2. Oil prices have hit about $30 a barrel following a cut in supply from Venezuela, a major supplier to the United States and the world's fifth-largest oil producer. Last week, crude prices in New York hit above $33 a barrel.

Saudi Oil Minister Ali Naimi had expressed hope Sunday that the production ceiling would be around 23 million barrels a day. However, OPEC nations decided to augment it to 24.5 million barrels a day, ignoring suggestions by the cartel's most influential member.

Al Attiyah said OPEC's price range would remain $22 -$28 per barrel of its benchmark blend of crudes.

Over the past few weeks, the strike in Venezuela and the threat of another Gulf War had sparked an oil panic leading to a sudden increase in prices. But with OPEC's latest announcement, prices are bound to fall and remain steady.

But for the U.S. market, which has been badly hit by the Venezuelan strike, incremental barrels from the Middle East will take about a month to reach its shores.

Meanwhile, Venezuela objected to the increase, fearing that it will lose its quota share in the world market. Ali Rodriguez, head of Venezuela's state-owned oil company, said that the country's oil production would reach the pre-strike level by the end of February.

Independent analysts say that OPEC's decision to raise production is more due to the pressure from the US government rather than what it describes as an effort to prevent a supply crunch.

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