- The Washington Times - Wednesday, June 2, 2004

BEIRUT (AP) — Several OPEC members expressed support yesterday for a Saudi plan to raise the group’s oil production ceiling by 10.6 percent in the hope of calming jittery markets and reducing crude prices from near record heights.

Oil prices sank more than 5 percent yesterday in trading in New York and London.

A more radical proposal by Algeria for the Organization of Petroleum Exporting Countries to suspend its output ceiling altogether appeared to win no backing.

OPEC representatives arriving in Beirut expressed a common desire to send a strong signal to oil markets that the group would boost production and ensure that crude supplies remained plentiful. They gathered for joint talks ahead of a formal meeting today on OPEC’s production policy.

A suspected al Qaeda terror attack on oil worker compounds in Saudi Arabia this weekend stunned markets that already were nervous about stretched oil inventories, Middle East tensions and a possible shortfall in supply. U.S. crude prices shot up to record levels in response but retreated somewhat yesterday as Saudi Arabian Oil Minister Ali Naimi stressed that his country was taking adequate security measures at its strategic facilities for collecting and exporting oil.

“I assure you that the kingdom and all OPEC members are concerned … and we don’t want high prices,” he said in a speech at the Beirut offices of the U.N. Economic and Social Commission for Western Asia.

U.S. light crude oil for July delivery fell $2.37 to settle at $39.96 per barrel, a day after settling at $42.33 — the highest settlement price in the contract’s 21-year history on the New York Mercantile Exchange. In London, July contracts of Brent crude settled at $36.86, down $2.22 from Tuesday’s closing price.

Under pressure from the United States and other major oil importers, Saudi Arabia already has boosted its output by 600,000 barrels a day, independently of OPEC. The United Arab Emirates also showed a willingness to add more barrels.

“In order to calm the heat of prices, the United Arab Emirates has taken a decision to increase production by over 400,000 barrels a day,” the country’s oil minister, Obaid bin Saif al-Nasseri, said at the Beirut airport.

For the most part, such an increase would represent a return to a normal level of production for the United Arab Emirates after a lull in output because of maintenance at its oil facilities in April.

Kuwaiti Oil Minister Sheik Ahmed Fahd Al Ahmed Al Sabah said Kuwait would increase its output by 100,000 barrels later this month.

Like Kuwait, Qatar and Nigeria also backed the Saudi plan to raise OPEC’s production ceiling to 26 million barrels — an increase of 2.5 million barrels.

OPEC produces more than a third of the world’s crude. Saudi Arabia, with the world’s largest proven oil reserves, is the group’s most powerful member. For this reason, the weekend attack that killed 22 persons at the Saudi oil hub of Khobar sent a tremor through the market, and the Saudis have sought to convince buyers that they are doing all they can to prevent an even more damaging attack.

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