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Opec seeks agreement for 5-6 percent more oil

VIENNA: Opec oil ministers were gathering on Sunday to nail down the details of a pact that is expected to raise their crude exports by about five to six percent.

The Organisation of the Petroleum Exporting Countries is set to seal the agreement at a conference starting here on Monday in an effort to ease high oil prices and avert an economic downturn in the oil importing nations of Asia and the West.

The producers are expected to bridge differences in opinion over how much extra they can afford to pump without sending international markets for their oil into a tailspin.

Saudi Arabia favours an increase of 1.5 million bpd, just over six percent above official quotas while Iran wants to limit the increase to one million bpd, Opec insiders said.

Gulf Arab producers, including Saudi, opened negotiations on Sunday in a series of bilateral talks in hotel suites by calling for a rise of 1.7 million barrels a day, delegates said. The opening gambit appears designed to produce an eventual middle-ground consensus.

The recent reversal in oil prices to $28 a barrel in the U.S., from a peak of $34 two weeks ago, may have strengthened the case for those that want lower volumes.

But Gulf producers are keen not to fall short of adding enough to bring prices back into the $20-$25 a barrel range that satisfies both Washington and most in Opec.

To that end, the cartel also seems likely to agree to meet again in June to see whether additional volumes are needed.

ALGERIA ON BOARD

Algerian concerns that any extra oil might send prices sliding appear to have been allayed.

Saudi Oil Minister Ali al-Naimi, after meeting with his Algerian countepart Chakib Khelil said: "We and Algeria are agreed on a position."

Khelil spoke on Saturday of a perception that Opec would offer another 1.2-1.4 million bpd.

That leaves only small producer Libya opposed to more oil.

Opec's incremental oil will come on top of official limits for 10 Opec nations of 22.976 million bpd agreed last March.

The cartel a year ago took drastic action to lift prices from single digits by removing 4.32 million barrels daily in an agreement that ends this month.

Leakage above official limits means most producers are already pumping near projected new quotas. Immediate net extra supply may only be a few hundred thousand barrels a day in the form of extra leakage.

Opec delegates said recent contacts between Gulf Opec leaders and U.S. President Bill Clinton had settled any last minute reservations about the output hike.

Worried about high gasoline prices and inflationary pressures, the United States sees room for Opec eventually to open up the taps by three million barrels daily on the 75 million bpd world market.

But the Clinton administration is understood to be content with the step-by-step approach signalled by Opec which would see more oil on the market later in the summer if prices do not cool in the next few months.

MEXICO LIFTING RESTRICTIONS

Mexico, Opec's main non-Opec ally in limiting oil sales, says it will add 200,000-300,000 bpd.

Energy Minister Luis Tellez said in a magazine interview that he would phase in the extra oil, effectively ending any Mexican restrictions on exports after two years of cooperation with Opec.

Sanctions-bound Iraq, not a party to Opec oil cuts, says it also is planning to raise oil sales in the next few weeks under Baghdad's humanitarian exchange with the United Nations.

Iraqi Oil Minister Amir Rasheed said the U.N.'s release of spare parts for Iraq's crumbling oil sector would allow Baghdad quickly to restore failing production. Iraq in a month aimed to lift oil exports by 700,000 bpd to 2.4 million bpd, he said.

Venezuelan Oil Minister Ali Rodriguez told reporters in Vienna that the extra Iraqi output would not have an impact on Opec's negotiations.-Reuters