Iran, Libya unsold on OPEC's planned oil production boost Copyright ) 2000 Nando Media Copyright ) 2000 Associated Press

By BRUCE STANLEY, Associated Press

VIENNA, Austria (March 27, 2000 9:03 a.m. EST http://www.nandotimes.com) - OPEC oil ministers struggled Monday to reach a consensus about raising their petroleum output to ease prices from nine-year highs to a more sustainable level.

But OPEC members Iran and Libya were withholding their support from a proposal to raise production by 1.5 million-1.7 million barrels a day.

Iran, OPEC's second-biggest producer of oil, objected to the size of the increase that Saudi Arabia, Kuwait and other group members have proposed ahead of the ministers' much-anticipated meeting later in the day, an OPEC delegate said.

The delegate spoke on condition of anonymity as Iran's oil minister, Bijan Namdar Zangeneh, and his Saudi counterpart, Ali Naimi, met for face-to-face talks prior to the meeting of the Organization of the Petroleum Exporting Countries.

The 11 OPEC ministers planned to meet later Monday to decide whether to extend production cuts made in 1998 and 1999 that have propelled oil prices to their highest levels since the Persian Gulf War. The latest round of cuts expires at the end of the week.

For consumers in oil-importing countries, much hinges on efforts by Saudi Arabia, OPEC's No. 1 producer, to win Iran over to its point of view.

Oil prices tripled to a March 8 peak of $34.37 per barrel, following OPEC's decision last March to slash production, and U.S. motorists are bitter about the sharply higher prices they have to pay for gasoline. Prices for U.S. West Texas intermediate crude have slipped somewhat in recent weeks to close Friday at $28.02.

OPEC pumps more than 26 million barrels of crude each day, or about 35 percent of the world's supply. Key non-OPEC producers, such as Mexico and Norway, are watching to see what OPEC will do before adjusting their own output.

The Saudis want to stabilize prices at a level that won't cause extreme economic pain for the nations that buy its oil. If high prices start damaging economies, producers fear demand for oil - and OPEC's export earnings - could plummet.

Iran favors raising OPEC's current level of production by no more than 1.3 million barrels per day, the delegate said.

However, such an increase in official production would barely cover the estimated 1.2 million barrels of "unofficial" oil that OPEC members are currently pumping each day. This cheating on production quotas would mean a minuscule amount of new oil actually reaching the market if Iran prevails.

Industry analysts said that Iran's reluctance to go along with its Gulf neighbors was the main impediment to an overall agreement that might offer relief for the United States and other importers.

It wasn't clear if Iran's opposition was merely an initial bargaining position.

Kuwait's oil minister, Sheikh Saud Nasser al-Sabah, said Sunday that OPEC is likely to raise its official output by 1.5 million to 1.7 million barrels a day.

The United States, world's biggest consumer of oil, hopes OPEC will raise production by 2 million-2.5 million barrels per day.

High prices for gasoline and home heating oil have become a hot political issue in this American election year, and Washington has applied intense diplomatic pressure to try to persuade OPEC member countries to open their taps further.

U.S. Energy Secretary Bill Richardson recently visited eight OPEC countries to lobby for greater production, adding a new dimension of politics to what is already a delicate process for OPEC of reaching a unified policy.

"The difference this time is the U.S. is involved," said Raad Alkadiri, an analyst with The Petroleum Finance Co., a Washington-based consultancy.

Alkadiri attributed Richardson's shuttle diplomacy largely to the sense of "quasi-crisis and hysteria" that many Americans feel about the recent run-up in oil prices.

Libya added to the uncertainty about the outcome of Monday's meeting.

Abdalla Salem El-Badri, head of Libya's National Oil Corp. told reporters he was still concerned that global demand for oil might decline in the second quarter of the year.

El-Badri refused to give details, but his comment suggested Libya was wary of increasing output at a time when demand for oil and refined products is historically at its annual ebb.

Asked if Libya would continue to oppose boosting output, he said, "I need further consultation."

OPEC ministers continued to meet privately in small groups in an effort to resolve differences ahead of Monday's semiannual meeting.

American motorists now pay an average of $1.59 per gallon for unleaded gasoline, an increase of nearly 60 cents since prices bottomed out at 99.8 cents per gallon in February 1999, according to a Lundberg Survey of 10,000 U.S. gas stations released Saturday.

Industry analysts warn of possible shortages and $2-a-gallon gas during the peak driving season this summer.

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-- Martin Thompson (mthom1927@aol.com), March 27, 2000