OPEC risks being dragged into conflict between Iran and West

[Dover]

OPEC risks being dragged into conflict between Iran and West

By Agence France Presse (AFP)

Monday, January 23, 2006


PARIS: OPEC, which is to set its production policy for the coming months at the end of January, risks being dragged into a conflict pitting Iran against Western oil consuming nations. The Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world's oil, is due to meet on January 31 in Vienna to decide whether or not it should cut its output in the second quarter, when demand usually eases as warmer weather comes to the northern hemisphere.

However, the decision will not be easy to take with oil prices only two dollars away on Friday from an all-time high of 70 dollars and amid uncertainty about global oil demand, especially from China.

But OPEC's task could be made more difficult as tensions between the West and Iran, the cartel's second biggest producer, heat up over the Islamic republic's nuclear ambitions.

Tehran has asked OPEC to reduce the cartel's oil production quota by one million barrels per day from April.

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Washington has weighed in to urge other OPEC member states to make up for any shortfall if Iran stops pumping.

U.S. Energy Secretary Samuel Bodman said that from administration contacts with the major oil producers, "my sense is that we will find that the suppliers will continue to make material available to the markets".

"They have not given me any specific assurance, but they understand what the demands are, and they understand what the problems for the world economy could be by escalating prices from this point," he told the CNBC network.

"So I think we'll find that they will do the right thing."

However, analysts say that the producers are already struggling to meet demand and that it would be difficult to cough up more oil to make up for a shortfall. -



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