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Complex decision for OPEC
By CNN's Paula Hancocks
VIENNA, Austria (CNN) -- As oil exporters gather in Vienna to set production levels, their decision will be influenced by world events. The threat of war in Iraq and political unrest and strikes in Venezuela will have a big impact on the Organisation of Petroleum Exporting Countries -- as the two countries are among the world's biggest oil producers. "The decision this time around in Vienna is not so easy because OPEC will have to consider what might possibly happen next year," said Leo Drollas of the Centre for Global Energy Studies. Any prolonged disruption to oil production could send crude prices higher, although OPEC's other members have vowed to make up for any shortages. "If a war scenario does play out in Iraq then other OPEC members will add production. If that's not possible strategic reserves in countries like the U.S., Japan and Germany are definitely going to be used," said Adam Sieminski of Deutsche Bank. But if tensions over Iraq recede, the cartel will have to look at ways to keep prices from falling. Some argue that there is already too much oil in the market, with member states producing far more oil than they have agreed to. "In October and November, the cheating among the OPEC member countries rose to over 2.5 million barrels a day. They have got to reduce that to somewhere between 1 million and 1.5 million barrels a day," Sieminski said. OPEC will also need to consider the seasonal change in the U.S. at the beginning of the year when demand in the world's biggest oil market traditionally drops back. That demand has led some cartel members to suggest they would tighten their taps to ensure that crude prices do not drop below their desired range of $22 to $28 a barrel, but they would be anxious to keep some flexibility. "They're worried about the formal quotas being cut next year when the market weakens so they want to push the quotas up so they're then able to cut back as they see fit," Drollas said. A final decision will depend on how much oil is actually in the markets with OPEC ministers having to weigh market forces against the political climate.
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