OPEC’s big guns keep options open on oil increase

Oil ministers, gathering to meet on Wednesday, have adopted a coordinated line, insisting that supplies are sufficient to meet winter fuel demand and that high prices are driven by factors outside OPEC's control.

But core Gulf producers, led by Saudi Arabia, are avoiding comment on whether or not the Organization of the Petroleum Exporting Countries might still opt for an output increase in a bid to rein in prices.

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While oil's decline from a record $99.29 a barrel two weeks ago to $89 on Tuesday appears to have reduced the odds for more OPEC oil, leading powers in the cartel have yet to show their hand.

'All options are open,' said Ali Al Naimi, the oil minister for OPEC's biggest producer Saudi Arabia.

Consumer countries, worried about slowing growth in the United States, think OPEC can help ease inflated energy costs by raising exports.

Some in OPEC may feel its interests are best served by a further price decline that would support the world economy as a 5-year growth spurt slows.

Others would prefer to keep prices high, arguing that growth in recent years is proof the economy can cope with higher fuel bills.

So far only only price hawks Venezuela and Iran, backed by Libya, have explicitly backed no change in output. Big Gulf producers, including Saudi allies the UAE and Kuwait have left markets guessing on their position.

'OPEC can either rollover and speculators will take the price up again before it comes down when reality hits,' said an OPEC delegate.

'Or they can increase, a gesture of 500,000 barrels per day, in order to remove OPEC's name for being a reason for increased high oil prices.'

When OPEC last met in September it signalled an output increase ahead of the meeting only for prices to rise sharply when it agreed just a modest 500,000 barrel-a-day, 2 percent, increment.

While OPEC routinely blames speculators for high prices and says it has no influence over the market, analysts in Abu Dhabi for this week's meeting think the cartel can influence price direction.

'The perception of a shortage of supply is driving the market,' said John Hall of John Hall Associates. 'If they don't raise output I think the price could go back up to $100 a barrel and we could see $100 before the end of the year.'

'If OPEC doesn't take action that results in actual barrels being delivered to the market the risk is that prices will resume their uptrend,' said Michael Rothman, head of oil research at US broker-dealer ISI Group.

Only minor producer Indonesia, marginal in terms of its influence on policy, so far has come out in favour of higher output if that would spur a price fall.

'We will support an increase in production if it is needed to lower the price,' OPEC governor Maizar Rahman told Reuters.

'Our target is only $60-$70 (a barrel). Developing countries suffer with a higher price.'