Leading producer nations appear poised to clinch a deal Wednesday on a modest increase in crude output as a gesture to calm volatile markets, after traditional hardliner Iran said consensus has been achieved.
Following talks with the dominant force in OPEC, Saudi Arabian Oil Minister Ali Al-Nuaimi, Iranian Oil Minister Bijan Namdar Zangeneh said late Tuesday: "I don't want to give figures, but we have an agreement."
Crude prices nevertheless surged as analysts forecast that any increase in production would be closer to 500,000 barrels per day than the million barrels per day that the United States, the world's largest oil consumer, is said to want and some analysts expect.
Secretary General of the Organization of Petroleum Exporting Countries (OPEC) Rilwanu Lukman predicted that Wednesday's extraordinary session should be "less contentious" than the organization's protracted March session "because we don't have the same problems."
A key problem in March was that Iran, citing unacceptable US pressure for more oil, refused to sign up to an agreement effectively to restore output to levels of the previous year in an attempt to calm prices.
Ahead of the March meeting US Energy Secretary Bill Richardson carried out a round of what he termed "gentle diplomacy."
This time, he has studiously kept a low profile, even though price levels have been particularly fired in the United States by a shortage of petrol (US: gasoline) following the onset of the summer driving season.
OPEC also agreed in March to convene this week's extraordinary session to reassess the market and informally decided on a mechanism to increase output automatically in the event of sustained high prices.
That mechanism has so far not been employed regardless of the level of the market.
In nervous trading on Tuesday, in London the price of benchmark Brent crude for August delivery closed 1.04 dollars higher at 29.02 dollars a barrel, while in New York, light sweet crude for July delivery climbed 1.36 dollars to 33.05 dollars.
The levels approach nine-year highs attained ahead of the March OPEC meeting of 32 dollars a barrel in London and 34 dollars a barrel in New York.
Roger Diwan, oil analyst and managing director at Washington-based PFC, said he believed OPEC had reached agreement on an output increase "low enough for Iran to accept."
He said he expected it to be slightly more than 500,000 to satisfy Saudi Arabia, but was probably lower than 800,000 or 900,000 barrels per day.
Leo Drollas, chief economist at the London-based Center for Global Energy Studies said the centre had previously forecast "a real increase" of 500,000 barrels per day.
That would mean increasing output by one million barrels, as OPEC members are widely believed to be producing around 500,000 barrels more than their official quotas.
However, he did not rule out that OPEC would continue to "cheat" by that amount in the increasingly likely event that the official production increase is only half a million barrels.
A major difficulty with a substantial increase is that most OPEC members are already producing close to capacity.
Apart from Saudi Arabia, the world's leading producer, only Kuwait and the United Arab Emirates are considered to have significant room for maneuver.
Drollas suggested that this time there is fundamental agreement between the Iranian and Saudi Arabian ministers that output should not be raised too recklessly as "the Saudis are very worried the underlying market is not so strong." - VIENNA (AFP)
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