Opec split over proposed cut in production

The Organisation of Petroleum Exporting Countries, the oil producers' cartel, appeared to be split going into today's key meeting to decide whether to sanction a cut in production.

Saudi Arabia, Venezuela, Libya and Algeria said Opec should cut output as planned to prevent a drop in prices because of a seasonal slowdown in demand. But Kuwait and the United Arab Emirates, neighbours and traditional allies of the Saudis, indicated yesterday that they would argue for a delay in the planned curb in output.

Opec agreed in principle in February to reduce quotas by 1 million barrels a day as of 1 April to 23.5 million a day. Since then crude prices have spiralled to their highest level for 13 years in New York. Prices on the London market are up 18 per cent in the past year.

The Saudi and Algerian ministers said prices are rising because of speculation in the market and not because of a shortage of oil.

"More oil now will make a glut in the market and force prices to collapse, something we don't want," Ali al-Naimi, the Saudi oil minister, told reporters in Vienna. "Throwing more oil on the market would be destructive for everybody."

Sheikh Ahmad al-Fahd al-Sabah, the Kuwaiti oil minister said he backed a UAE proposal for postponing the April cuts. He recommended that producers defer the planned million-reduction for discussion at Opec's 3 June meeting in Beirut.

The US has urged Opec to delay, warning that high oil prices could damage the world economic recovery. "Both the Kuwaitis and the UAE appear to be dancing to the US tune but the market believes the Saudis will get their way," said Nauman Barakat of brokers Refco in New York.

Yesterday US crude rose 90 cents to $36.35 a barrel with Brent crude up 45 cents at $32.19 a barrel in London.

The rally over the past year came partly as Iraqi production, plagued by sabotage in the months following the war last year, lagged expectations. Higher prices also followed stronger-than-expected world demand, led by economic growth in China.