OPEC countries expected to reject Venezuela's suggestion for production cut

Venezuelan President Hugo Chavez is pushing for an oil production cut as he hosts an OPEC meeting on Thursday, but he appears to be a lone voice as other countries will likely want to keep output unchanged to temper soaring prices. Qatari Oil Minister Abdullah al-Attiyah said he doesn't expect the Organization of Petroleum Exporting Countries to adjust production levels. "There will be no new decision in this conference," because there is little reason to change output amid current high oil prices, al-Attiyah told the pan-Arab newspaper Al-Hayat in comments published Tuesday.

Exacerbated by the Iranian nuclear dispute, oil prices remain above US$70 (54) a barrel, and the United States, the world's largest energy consumer, is expected to drive up demand in coming months when it heads into summer driving and hurricane seasons. Analysts say OPEC is likely to avoid being seen as trying to drive up prices any further, when there are already mounting fears of disruptions to the oil supply. "It would be a very bad signal to cut quotas at US$70-US$71 (54-  55) per barrel," said SG Securities analyst Frederic Lassere in Paris . "From a political point of view ... it would be very, very difficult to justify to the consumers."

OPEC has maintained its official output ceiling unchanged at 28 million barrels a day since July 2005. The United Arab Emirates ' oil minister, Mohamed al-Hamili, also said he expects OPEC to maintain that. The 11-nation producers' group, however, may find it difficult to take any action to moderate current oil prices.

Maintaining or boosting output does little to address the factors behind the current run-up, which include a lack of refining capacity, a larger global run on commodities, and geopolitical tensions, Lassere said. "I don't see what kind of decision would have any impact on the price in the current context," he said. "The market is not asking for more crude."

Venezuelan Oil Minister Rafael Ramirez justified a production cut on Monday saying the market was well supplied, oil inventories are above historical highs and that prices were above acceptable levels for "reasons that are fundamentally geopolitical." He said OPEC should "at least maintain" output, but quickly added, "if we were to base it on the fundamentals of the market, we should propose a production cut." A founding member of OPEC along with Saudi Arabia , Venezuela has consistently been one of the cartel's strongest price hawks.

Chavez played a key role in getting OPEC members to abide by production quotas that have helped reverse prices from roughly US$10 (  8) a barrel when he took office in 1999, which subsequently quadrupled Venezuela's oil export revenues. Chavez has called US$50 ( 39) a barrel a fair price for oil a level also backed by the UAE's Al-Hamili on Monday.

Also under close watch as OPEC gets under way will be a meeting on Iran 's nuclear impasse the same day by top international negotiators in Vienna , Austria . U.S. , Russian, Chinese and European officials are expected to sign off on a package of incentives to reward Iran if it gives up uranium enrichment. But the agreement could also open the way for economic sanctions if Tehran refuses.

Kamal Daneshyar, chairman of the Iranian Parliament's Energy Committee, told Dow Jones Newswires on Monday that Tehran could retaliate for any sanctions by closing the Strait of Hormuz, a major oil shipping route, which he said could drive prices as high as US$250 (195) a barrel. Oil prices, which are 40 percent higher than a year ago, have also been propped up by ongoing instability in Nigeria that has curbed output from Africa 's largest crude producer. In Venezuela , Chavez's justice minister and vice president warned that some opponents were planning a wave of violent protests ahead of the OPEC meeting to try to destabilize the government. They said there would be ample security to prevent any problems, reports the AP.


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