LONDON (CNNfn) - The angling for position ahead of the formal start of a pivotal OPEC oil meeting got under way Saturday, as Saudi Arabia was said to call for an expansion of output by 1 million barrels per day while other members with less capacity to raise output recommended half that.|
Ministers from the oil cartel were gathering in Vienna for Sunday's start to a meeting that looms large for the global economy after crude oil prices rose to new 10-year highs Thursday - prompting President Clinton and other officials to warn of a global recession if prices don't come down soon.
Analysts have expected OPEC to approve an accord that calls for an increase of at least 500,000 barrels per day because prices have soared so high in recent weeks that an automatic mechanism to hike supply has been triggered. Earlier this year the cartel agreed to boost production by that much if the average price of crude oil stayed over $28 a barrel for 20 straight days.
The Brent crude oil futures contract has settled above $28 per barrel every trading day in London since Aug. 3. On Friday, Brent crude settled at $32.75 per barrel, down $1.77.
That sharp decline from Thursday's 10-year-high was prompted by the expectation that Saudi Arabia, keen to see prices fall back to about $25 per barrel, would spearhead a push for raising output by 700,000 barrels per day. Any increase in output would be the cartel's third this year.
OPEC delegates said Saturday that Saudi Arabia, the world's largest oil producer and one of just three OPEC nations said to be capable of hiking their output, had proposed an increase of 1 million barrels per day, Reuters reported.
"I would think they are setting their bargaining position high, so that when they sit at the table, they can then compromise," Gary Ross, an oil analyst with energy consulting firm Pira Energy Group, told CNNfn in Vienna.
'Difference' between Kuwait, Saudi Arabia
Analysts have said Saudi Arabia, which accounts for nearly one-third of OPEC's current daily total production of 25.9 million barrels of oil, is in the uncomfortable position of wanting to increase output, but not if it looks like a unilateral move.
Ali Al-Naimi, Saudi Arabia's oil minister, was quoted by Reuters as saying OPEC has worked toward achieving "a meaningful cooperative spirit" for two years. "Do you want us to risk throwing it away?" he said.
Kuwaiti Oil Minister Sheikh Saud Nasser Al-Sabah said his country would prefer an output increase of 655,000 barrels a day, Reuters quoted delegates as saying.
"There is a difference between Saudi Arabia and Kuwait," one source at OPEC told CNNfn.
Iran's oil minister, Bijan Zanganeh, said he favors increasing output by 500,000 barrels per day, adding that he sees no shortage in the market.
Qatar's oil minister, echoing a common theme in OPEC circles in recent months, partly faulted high taxes on oil for the upswing in prices.
That has struck a chord with many European consumers: truckers in France and more recently Great Britain have been leading protests against their governments for their policy of high taxes on oil.
Based on recent European Union data, the United Kingdom has the highest tax rate on gasoline among the 15 EU members -- at 76 percent of the pump price. Greece has the lowest, at 52 percent.
Saudi Arabia, Kuwait and the United Arab Emirates are the only countries with the ability to raise output - other countries are producing oil at capacity.
Analysts have speculated that even if output rises by 700,000 barrels per day, the price of crude oil is under such pressure that it could reach $40 a barrel.
Oil inventories in the United States, the world's biggest oil consumer, have recently dropped to a 24-year low, according to American Petroleum Institute data.
"It's a hard deal," said Ross of Pira Energy, suggesting high demand was partly behind the rising prices. "To some degree, it's out of [OPEC's] control because of the strong product market."
-- from staff and wire reports