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OPEC meets to halt price shock
LONDON, England (CNN) -- OPEC will hold an emergency meeting on Sunday to prevent global oil prices spiraling out of control. The Organization of the Petroleum Exporting Countries told CNN that the meeting will take place in the Austrian capital of Vienna after oil prices surged more than 25 percent in the last two months. OPEC will decide on how much extra oil needs to be pumped to replace lost supply from Venezuela, where general strikes have dragged on for six weeks and virtually turned off the taps. And the looming conflict with Iraq threatens to shock the already anaemic global economy. Kuwaiti Oil Minister Sheikh Ahmad al-Fahd al-Sabah said ministers were discussing an increase of 1.0-1.5 million barrels a day, a rise of 4 to 7 percent on limits now of 23 million. "There are two proposals. One million barrels per day and 1.5 million barrels a day,'' the minister told reporters in Kuwait. "We would favour raising by one million and would agree to 1.5 if necessary.'' Brent crude for February delivery fell 40 cents to $28.93 a barrel on London's International Petroleum Exchange in mid-morning trading. Global crude oil prices have been trading above $30 a barrel raising concerns about the state of global economy and its ability to cope with further prices rises. As crude prices rise, companies have to pay more for oil derivatives, which they are likely to pass onto consumers. At the same time, consumers may end up paying more to fill up their cars, which would leave them with less money to spend elsewhere. OPEC would prefer oil prices to trade in the $22-$28 a barrel range, a price that it feels does not threaten world economic growth. "The world has tried everything to boost growth without much success and if oil prices stay high we're in for another year of very slow growth,'' Mehdi Varzi, an oil expert at Dresdner Kleinwort Wasserstein, told Reuters. U.S. crude prices rose to $33.65 a barrel but has been retreating since the end of December when it was first revealed that OPEC was discussing a substantial output increase. "They're trying to prevent panic on the oil markets. Most in OPEC are resigned to a war in the Gulf,'' said Varzi. Saudi Arabia, the world's biggest oil producer, would like the oil cartel to pump an additional 1.5 million barrels a day, but others are not that keen. OPEC wants to plug a 2.7 million barrel a day supply deficit from Venezuela. In the event of war, there would be a 2 million barrel a day loss of Iraqi supplies.
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