Oil power Saudi Arabia is pushing fellow Opec members to agree an output hike as big as two million barrels a day to stop blistering prices from threatening the global economy, an Opec delegate said yesterday.
The latest proposal is double the size of the increase presented by the Opec president earlier this week, and other cartel delegates saw it as excessive in response to a prolonged strike in Venezuela which slashed exports.
"There is a plan being circulated now to increase production by between 1.5-2 million barrels per day (bpd)," the senior Opec delegate from a key producer told Reuters.
"This plan is supported by Saudi Arabia and others," he added, asking not to be named.
World oil prices have jumped by a quarter in two months to near two-year highs on the deepening crisis in Venezuela, the world's fifth largest exporter, where exports have dropped by two million bpd.
The supply shock has drained US oil stockpiles to near their lowest levels in 26 years, just as Washington prepares for war on Iraq.
International benchmark Brent crude oil fell sharply on the comments, standing 73 cents lower at $29.47 per barrel by mid-morning in London.
"The plan to increase supplies is in light of the shortage from Venezuela and a sharp drawdown in global stockpiles," said the Opec delegate.
"And there is a strong desire within Opec not to have a high price which might harm world economic growth, especially in developing countries."
Those favouring a smaller increase said a hike of two million bpd could drive prices sharply lower.
"Two million is too much," said another Opec delegate.
The Venezuelan strike, which is now five weeks old, could fall apart at any time, releasing about two million bpd onto world markets.
And any extra barrels produced now in the Middle East will reach markets by March, just as demand tails off after the winter peak.
"I am concerned about the second quarter if there is an increase of a million barrels per day or more, because it could drive prices down," said an Opec source, asking not to be named.
"There is no decision yet and there are several proposals on the table," he added.
Opec President Abdullah al-Attiyah, of Qatar, said on Sunday the Organisation of the Petroleum Exporting Countries was preparing an increase of up to one million bpd. Kuwait said it could be as large as 1.5 million.
Attiyah said yesterday that he had yet to receive figures from fellow ministers, but that a decision would be made before January 14.
Opec has an informal mechanism under which it raises output if prices stay above the top end of its $22-$28 target price band for 20 working days. Opec's basket price stood at $30.71 on Monday, and will complete the 20th day on January 14.
Kuwaiti Oil Minister Sheikh Ahmad al-Fahd al-Sabah said Opec was also hoping for extra oil from big exporting nations outside Opec, such as Russia, Mexico and Norway.
But these three countries are already pumping at or near full capacity. Opec itself has only 2.77 million bpd of spare capacity, according to a Reuters survey of industry officials and analysts published yesterday.
Only last month Opec agreed to cut production in line with a target of 23 million bpd, after months of rampant quota busting threatened to spread dissent in the 11-member group.
Now the group of mostly Middle Eastern states is faced with a possible twin supply shock from Venezuela and Iraq, if the United States decides to attack the Arab country.
Of the 10 Opec members bound by production limits, only the world's top exporter Saudi Arabia, its Gulf neighbour the United Arab Emirates and Africa's top producer Nigeria can add significant extra volumes.