Iran Softens Stand on Oil Increase By AFSHIN VALINEJAD, Associated Press Writer

TEHRAN, Iran (AP) -- Price hawk Iran appeared to soften its stand against an increase in OPEC oil production after a meeting Wednesday between the Iranian and Saudi Arabian oil ministers.

A joint statement issued after a meeting between Iran's Bijan Namdar Zanganeh and Saudi Arabia's Ali Naimi said the ministers agreed that market volatility was not in the long-term interests of producers or consumers, Iran's official Islamic Republic News Agency reported.

''The ministers agreed that current market conditions and outlook necessitate that oil producers from OPEC and non-OPEC provide adequate and timely oil supplies to balance the market in order to reach sustainable price levels conducive to world economic growth and market stability,'' IRNA quoted the statement as saying. The ministers met in the Saudi capital Riyadh.

The joint statement along with later remarks by Zanganeh suggested Iran was moving toward supporting an increase in oil production by the Organization of Petroleum Exporting Countries.

OPEC ministers are scheduled to gather in Vienna on March 27 to consider raising production quotas to increase the world's supply of oil and help bring down spiraling prices.

The statements from Iran appeared to ease fears on oil markets.

In late afternoon, the price for Brent crude for delivery in April was down $1.06 a barrel at $30.84 on London's International Petroleum Exchange. On the New York Mercantile Exchange, the front-month crude in early afternoon was down $1.09 a barrel at $33.04.

Crude prices had rocketed Tuesday, with oil on the Nymex closing at $34.13 a barrel after reaching as high as $34.20.

After his meeting with Naimi, Zanganeh told state-run Iranian television that the unity of OPEC was very important and that the cartel should reach a decision that would not ''damage'' the oil market yet would be beneficial to both producers and consumers.

''Fortunately the view exists among us and other members that OPEC should continue playing its role in the market and that unanimity is very important,'' Zanganeh said.

As recently as Tuesday, Zanganeh said the latest increase in prices was only ''transitory'' and that no hasty decision should be made on production levels by the 11-nation OPEC cartel.

Oil prices have been rising since OPEC and non-OPEC producers began cutting back production in the spring of 1998 to counter a drop in prices to 12-year lows. Total cutbacks amount to some 5 million barrels a day.

Prices are now so high -- and inventories are so precariously low -- that the United States and other Western countries have been urging OPEC to increase output. The U.S. Energy Department said earlier this week that even if OPEC agrees to raise production, gasoline prices still could hit $1.80 or more a gallon in the United States before they ease.

On Monday, oil producers Libya, Iran and Algeria said OPEC should extend its production cuts when they expire at the end of the month. They said there is no need to pump more oil now because the world will be entering a traditionally low-demand period in the second quarter.

In his statement to television on Wednesday, Zanganeh blamed the current surge in prices on market speculation, not shortages.

''In my opinion, it is due to the speculative nature of those in the trading. They keep pushing the price up,'' he said.

He said political pressure also was influencing prices, an apparent reference to U.S. lobbying efforts.

Naimi, along with his Mexican and Venezuelan counterparts, said after a meeting last week that he believed the market needs more oil, but he did not specify how much or when output should be raised.

http://www.newsday.com/ap/business/ap637.htm

-- Martin Thompson (mthom1927@aol.com), March 08, 2000