Opec Members Oppose Saudi Oil Boost

Saudi Arabia ran into opposition today over its plan for a modest boost in oil output to keep prices from rising.

On the eve of an Opec oil cartel meeting in Isfahan, Iran, producers discussed Saudi proposals to lift official output limits by a modest 500,000 barrels a day.

Saudi Arabia said its proposal would take actual Opec output to 28.2 million barrels a day, from an estimated 27.7 million barrels now. As Opec members typically produce more than their allocated quotas, the official production limits under the Saudi plan would rise to 27.5 million barrels a day from 27 million.

"We're concerned about prices, we're also concerned about economic growth and we're particularly concerned about economic growth in developing countries," said Saudi Arabia's oil minister, Ali al-Naimi.

But the Saudi proposal was opposed by some Opec members. Algeria and Libya rejected the plan, saying the group could do nothing to control this year's surge in oil prices beyond $50 (£26) a barrel.

"We could do a goodwill gesture, but it doesn't mean anything in terms of reducing the price," the Algerian minister, Chakib Khelil, told the Bloomberg news agency. "We can add barrels, but that won't stabilise prices. Economic growth has to slow down."

Iran also opposed the move, arguing that demand usually eases after winter in the northern hemisphere. With Opec's output close to September's 25-year high, even producer countries are showing signs of concern about their ability to meet rapid demand growth in the second half of the year.

"It [the price of oil] is too high but you should not blame Opec," said Qatar's oil minister, Abdullah al-Attiyah. "Opec has done all it can do. This is out of the control of Opec."

Saudi Arabia, the world's largest oil producer, yesterday took the unusual step of announcing future supply plans, saying it would lift output later in 2005 to meet a second successive year of heavy demand growth led by China.

Riyadh, the only world producer with any significant spare capacity, is particularly concerned about meeting demand in the fourth quarter of the year, when seasonal demand peaks. The Saudi proposal to increase production should please the US, the world's largest oil consumer.

The US energy secretary, Sam Bodman, called a number of Opec oil ministers ahead of this week's meeting, oil ministers said today. Washington has expressed its concern over high prices, saying inflated energy costs could hurt economic growth, a worry shared by the chancellor, Gordon Brown.

Others in Opec see no economic damage from even higher prices, pointing out that the peaks of the 1970s, allowing for inflation, were equivalent to $80 a barrel in today's money.

"Even at $60 we see no economic impact," said the Libyan energy minister, Fathi Omar Bin Shatwan.

Oil prices have tripled in the past three years as rising demand from China, India and the US left Opec with little spare capacity. The International Energy Agency last week said it expects petroleum needs this year to increase by 2.2%.

US oil prices so far this year are averaging $48.74 a barrel, up from $41.47 in 2004 and $30.99 in 2003. US crude for April delivery today dropped 5 cents to $54.89 a barrel.