Opec under pressure to expand

Caracas: Oil-producing nations brushed off a push by Venezuelan leader Hugo Chavez to cut production, but he used the Opec meeting to push for expanding the group's membership and praised Bolivia's nationalisation of its natural gas industry.

Qatar's oil minister, Abdullah Bin Hamad Al Attiyah, said ahead of yesterday's meeting that he did not believe output should be cut now, echoing comments by other important Opec players.

But he said Opec will be watching the situation between now and its next meeting in September, and could then change course.

Many other ministers said prices have shot ever higher because of events like nervousness over Iran's nuclear weapons programme, but insisted supplies are adequate even in the face of rising demand from countries such as China and India.

"To tell you the truth, I won't be surprised to see prices go even higher," the head of Libya's oil policy, Shokri Ganim, said. "There are so many factors like geopolitics and speculation, so there is no reason why prices won't go up."

Milder stand

Though Chavez has repeatedly said a cut is justified, he seemed to back off the effort in a speech on Wednesday night, choosing to focus on South American energy politics instead of pressing anew for an output reduction.

Hours after Ecuador said it had been invited by unnamed Arab countries to join Opec after parting ways with the group 14 years ago, Chavez said he welcomed the move and also said Bolivia should be considered.

The Andean nation has South America's second largest natural gas reserves, and Bolivian President Evo Morales nationalised the industry last month in a move that has sowed fear among multinational companies that have been extracting its gas since a privatisation wave in the mid-1990s.

Chavez's strident remarks added political flair to a meeting that appeared to have few oil-related decisions left.

Venezuelan Oil Minister Rafael Ramirez said earlier that reducing output is justified because global markets are well supplied, adding that uncertainty over US actions against Iran and the war in Iraq were prime causes of high oil prices. He said Opec should consider a cut but that "we don't want to introduce elements that are going to be contributing to instability."

While many members of the Organisation of Petro-leum Exporting Countries agree that geopolitical instability as well as refinery bottlenecks and investor speculation has played a major role in pushing energy costs higher, they do not want to risk exacerbating the situation by cutting output.

That's because the political backlash would probably be severe, and the move could backfire against Opec if higher prices led to reduced demand, analysts say.

"There has been talk of a cut for months now, which typically tends to be pushed back to the next meeting, over and over again," said Antoine Halff, director of global energy at Fimat USA in New York.

"This meeting is more about Venezuelan politics than it is about Opec policy," Halff said.

While having more Latin members in Opec would not significantly shift influence within Opec away from the Middle East, it might be seen as a victory for Chavez as an international statesman.

Meantime, Opec members are divided on which direction they see oil prices heading. Ganim predicted crude futures now hovering above $70 a barrel will rise, but Iranian Oil Minister Kazem Vaziri Hamaneh said high inventories could push prices down.

Crude oil futures for July delivery were down nearly $1 yesterday morning to $70.45 a barrel on the New York Mercantile Exchange.

The decline came after Iran's foreign minister welcomed the idea of direct talks with the United States over its nuclear programme, but rebuffed the US condition that Tehran first must suspend uranium enrichment.

In talks yesterday in Austria, US, Russian, Chinese and European officials are expected to agree on incentives to reward Iran if it gives up uranium enrichment.