Opec close to agreeing 7% oil output increase

OPEC, the oil cartel, was last night expected to hammer out an agreement to raise output by 7.4 per cent or 1.7 million barrels a day in the face of mounting pressure from the West.

Ministers from the leading oil-producing countries met in Vienna to set its annual output quotas. Opec's agreement a year ago to cut output by 4.3 million barrels sent the price surging to a nine-year high of more than $32 a barrel.

Obeid bin Seif al-Nasseri, the UAE's oil minister, said all 11 Opec members supported an increase of less than 2 million barrels. The International Energy Agency, the West's watchdog, wants at least 2.3 million.

Opec's incremental oil will come on top of official limits for 10 Opec nations of 22.976 million barrels per day (bpd) agreed last March. Saudi Arabia was hoping it could clinch the deal, raising official cartel limits by just over 7 per cent, without making a concession to Iran, which wants less.

Bijan Zanganeh, the Iranian oil minister, wants to cap the increase at little more than one million bpd, delegates said.Some delegates have suggested Saudi might have room for manouevre for an eventual 1.5 million bpd increase. A Gulf official said 1.7 million bpd remained the preferred option for Gulf producers, despite Iranian objections.

"There are still some differences," said the United Arab Emirates Oil Minister, Obaid al-Nasseri.

Tehran is worried about the consequences of Iraq's move to increase its exports under United Nations supervision. The Iraqi Oil Minister, Amir Rasheed, said Baghdad would take advantage of the UN's approval of spare parts for its oil sector and lift exports by 700,000 bpd.

The Gulf Arabs are eager to secure a deal big enough to ease prices back into the $25 a barrel range that satisfies both the United States, Opec's biggest customer, and most in the cartel. "We're looking for $23-$25 a barrel for [UK] Brent," said the Kuwaiti Oil Minister, Sheikh Saud al-Sabah.

That is equivalent to $25-$27 for crude in the US market where crude on Monday was valued at $27.60. The US sees room for Opec eventually to open up the taps by three million barrels daily to replenish depleted inventories. The cartel also seems likely to agree to meet again in June to review the limits.