OPEC members rush to raise oil output
Wednesday March 09 2011 | 05:55 AM

Influential members of OPEC, the oil cartel, are joining Saudi Arabia in raising output to cool soaring prices and allay fears of a supply crunch in the west.

The behind-the-scenes move by Kuwait, the United Arab Emirates and Nigeria reflects growing unease among OPEC [Organisation of the Petroleum Exporting Countries] members over the threat to the global economic recovery from crude’s runaway rise amid the worsening crisis in Libya.

US oil prices increased to their highest levels since September 2008 on Monday, trading at an intraday high of $106.95 a barrel, as Brent, the European benchmark, hit a session high of $118.50. Gold jumped to a fresh record of $1,444 an ounce.

Industry officials said the production increase, expected by early April, would – together with an earlier rise by Saudi Arabia – almost make up the shortfall in supply from falling Libyan crude exports.

They said that Kuwait, the UAE and Nigeria were to ramp up their production by as much as 300,000 barrels a day in coming weeks. Riyadh has raised its output by about 700,000 b/d. The surge in output is the result of both a policy decision that reduces the need for an emergency OPEC meeting and oilfields coming back into production after maintenance.

Oil prices fell back on Tuesday as reports of the expected increase in output calmed worries about restrictions on output. Brent crude fell as much as $2.25 to $112.79, nearly $7 below its recent peak reached last month.

US crude, which closed above $105 on Monday, was down $1.36 at $104.08.

The International Energy Agency, the western countries’ oil watchdog, estimates Libya’s oil production has fallen by about 1m b/d, down two-thirds from a prevailing output level of 1.58m b/d before the start of the crisis three weeks ago.

In Libya, troops loyal to Muammer Gaddafi battled with rebel forces outside the Ras Lanuf oil terminal and launched a number of air strikes on Monday, continuing a counter-offensive to prevent the rebels’ advance west.

Traders voiced fears that the fighting was turning into a civil war.

“The oil markets are pricing in an extended Libyan shutdown of crude exports,” said Michael Wittner, head of oil research at Société Générale.

The OPEC cartel, which controls 40 per cent of global oil supplies, is divided about the need to increase output.

While Saudi Arabia has responded quickly by pumping more oil and some members are now quietly following, others including Iran and Algeria oppose an increase and see no shortage of oil in the market.

“OPEC is evaluating whether [it] needs to meet or not,” Qatar’s oil minister, Mohammed Saleh al-Sada, told reporters in Doha. The cartel has been debating in recent days whether to call an emergency meeting but has so far decided against it, officials said.Riyadh is pumping about 9.2m-9.3m b/d, after raising production by 700,000 b/d, according to a senior western oil official.

Other officials said Kuwait and the UAE were boosting output jointly by about 100,000-150,000 b/d in the next few weeks. Nigeria is set to add another 150,000-200,000 b/d in April with the return from maintenance of the Qua Iboe and Bonga oil fields, which produce high quality oil.