Opec split over production as oil price hits new high

[Rob-TheStormChaser]

The oil producers' cartel Opec is split over whether to sanction an unlimited rise in output in the case of a Gulf war at its meeting later today.

Saudi Arabia and Kuwait are hoping to get approval for plans to set aside production quotas if war stops Iraqi exports. But Iran accused the nations of implicitly adding support to a US-led attack on Iraq ­ an Opec member ­ by attempting to suppress oil prices. Bijan Zanganeh, the Iranian Oil minister, told the country's IRNA news agency: "Iran will not back politically motivated decisions."

Iran was supported by Algeria, which said there was no need for in an increase in output as there was already excess supply in the wake of earlier Opec decisions to increase production. Libya is also hostile to the Saudi plan.

Yesterday, oil prices hit a two-year high of $34.55 in London as traders responded to the 17 March deadline for Iraqi compliance. Saudi Arabia has already indicated it is prepared to increase supply with or without Opec approval.

Lawrence Eagles, an analyst at GNI Research, said: "Politically [the Opec talks] are important, but in practical terms few observers believe that there is any significant spare capacity outside of Saudi Arabia." Analysts said Saudi Arabia would be stretched to fill a shortage as it was already pumping more than 9 million barrels daily of its 10.5 million capacity.

Iraq's 1.7 million barrels daily is almost certain to shut and Kuwait says it could close up to 700,000 barrel output near its northern border with Iraq.