OPEC members to resume debate on production hikes

March 27, 2000
Web posted at: 11:12 p.m. EST (0412 GMT)

In this story: 'I'm not sure gas prices have peaked' Iraq's untapped reserves a question mark RELATED STORIES, SITES

VIENNA, Austria (CNN) -- Ministers from the top oil-producing countries meet for a second day of talks aimed at stabilizing oil prices Tuesday, as major importing nations watch the deliberations with an eye on the gas pump.

The Organization of the Petroleum Exporting Countries failed to reach a consensus for raising production quotas among its 11 members Monday. While almost all analysts and market watchers expect the cartel to boost production, the size of the increase remains in question.

VIDEO CNN's Garrick Utley looks at how oil prices might be affected if there were not United Nations sanctions against Iraq. Real 28K 80K Windows Media 28K 80K CNN Senior International Correspondent Richard Blystone takes an in-depth look at the Organization of Petroleum Exporting Countries. QuickTime Play Real 28K 80K Windows Media 28K 80K     MESSAGE BOARD Rising oil prices

"We are willing to take steps that will enable us to balance perceived demand with supply to establish stable prices in the market place," OPEC Secretary-General Rilwanu Lukman said.

OPEC members are uniformly trying to decide how far to open the oil tap without sending prices crashing back to the $10 per barrel level of January 1999. Most say they want prices to settle at about $25 per barrel.

The independent International Energy Agency in Paris said last week that a rise of 500,000 to 1 million barrels is needed just to balance supply and demand, while 2.3 million barrels would help to replenish reserves.

OPEC nations cut production in 1998 to drive up prices, and the move succeeded better than they planned. But high prices make smaller producers more competitive and force consumers to think in terms of conservation.

Saudi Arabia, the world's biggest oil supplier, is reportedly seeking a daily production rise of up to 1.7 million barrels per day -- less than the United States wants, but more than nations such as Iran want to see.

Iran is pushing for a daily increase of 1.2 million barrels, which is unlikely to cut crude oil prices that have more than doubled since 1998. U.S. officials want production increased by about 2.5 million barrels as consumers pay more than $1.50 per gallon for gasoline -- a situation even a quick decision is unlikely to change.

"I think the impact will be slow, as I am not sure gas prices have peaked as yet," oil analyst Mehdi Varzi said. "After all, it's the refiners that have got to get the crude, produce it and then put it into inventory at the very time that demand in the U.S. is beginning to rise."

Iraq is also objecting to large production increases, saying it will produce another 750,000 barrels a day under U.N. supervision, aside from any increased flow from other OPEC states.

Iraq's oil reserves are second only to Saudi Arabia, but under U.N. sanctions imposed after Iraq invaded Kuwait in 1990, it may sell oil only for humanitarian purposes such as to buy food and medicine.

"If it actually produced as much as it could, obviously, it would add tremendously to oil supplies, and it would push the price down," said Antoine Halff, an analyst with the Energy Intelligence Group.

The United Nations has allowed Iraq to repair wells and pipelines long neglected. And several companies already have agreements to begin pumping Iraqi oil once the sanctions are lifted.

But the government of Saddam Hussein is likely to remain under sanctions as long as it blocks U.N. weapons inspectors from operating in the country.

Senior International Correspondent Richard Blystone, Beirut Bureau Chief Brent Sadler and Correspondent Garrick Utley contributed to this report.

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