Opec rejects calls to boost oil output

Opec rejects calls to boost oil output

Opec oil ministers today snubbed calls from the west to increase oil production as they agreed to leave output unchanged despite a weak global economy.

The Opec decision in Osaka, Japan could have a vital bearing on the global economy at a time of sluggish growth and peak demand for energy with the onset of winter in Europe and America.

Saudi Arabia, the cartel's leading producer, was leaning in favour of boosting output and lowering prices, but fell in line with the other 10 members who wanted to maintain prices at current levels.

Saudi Arabia's position is particularly delicate as it does not want to get on the wrong side of the US at a time when Washington suspects that Ryadh is not doing enough to crack down on Islamic fundamentalists in its midst. At the same time, the Saudis do not want to be the odd man out in Opec.

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"There is a consensus that there is enough oil," the Opec president, Rilwanu Lukman, said. "There is no need for more than we are physically putting into the market at the moment."

The news will come as a disappointment to the west as lower prices would ease worries about sluggish economic growth, especially in the US. But Mr Lukman pledged that more oil would be pumped if the price moves too high.

Oil prices recently hit $30 a barrel amid fears of a US-led attack against Iraq, a move that could destabilise the region and disrupt oil supplies. They fell back when Iraq agreed to unconditionally re-admit UN weapons inspectors, but are creeping up again with America's continued insistence on toppling Saddam Hussein.

The so-called "war premium" is believed to have inflated oil by $2 to $4 per barrel. Kuwait voiced concern of a nightmare scenario in which Iraq would attack its oilfields in the event of war. Retreating Iraqi forces set numerous oil wells on fire when they retreated from Kuwait in the 1991 Gulf war.

With the threat of hostilities, oil prices have been hitting the upper end of Opec's target of between $22 and $28 a barrel - or exceeding it. But the Osaka meeting decided to stick to its official supply ceiling of 21.7m barrels a day, which is being boosted by up to 2m extra barrels a day by members cheating on their individual output quotas.

OPEC ministers said they would meet again on December 12 to take another look at prices and market supply. Analysts warn that oil prices rising above $30 a barrel would place an additional burden on the global economy at a time when financial markets are in retreat amid a spate of profit warnings from bellwether companies such as JP Morgan, America's second biggest bank, and Oracle, the software company.

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