OPEC maintains oil output

Oil producing nations, pumping almost as much as they can amid soaring oil prices, are to keep their output steady, rejecting suggestions by Venezuela to cut production.

Organisation of Petroleum Exporting Countries (OPEC) president Edmund Daukoru announced the decision as oil ministers emerged from their closed-door talks in Venezuela’s capital Caracas, saying oil producers were concerned about market volatility and could still act to adjust production later if necessary.

“We still worry about drastic upswings, just as much as we worry about downswings” in price, said Daukoru, who is also Nigeria’s oil minister.

Even with oil prices hovering above $70 a barrel, rising global inventories of crude have some OPEC member concerned and thinking about a production cut down the line.

“Stocks are building and we don’t want a catastrophic situation by neglecting the build-up of stocks. So we keep that on a close monitor,” Daukoru said.

In an official statement, OPEC said despite the choice of keeping the status quo in output, it maintained a “readiness to act swiftly … to safeguard the interests of member countries”.

Qatari oil minister Abdullah al-Attiyah said earlier that “at this price level, OPEC won’t cut production”. But he warned that OPEC could change course by the time it met again in September.

Venezuelan president Hugo Chavez, a long-time price hawk, suggested trimming production and repeated calls for OPEC to establish a minimum price of $50 a barrel.

“There is enough oil on the market. We even believe there is an excess of oil on the market,” Chavez said in a speech. “$50 is a fair price, but as a minimum.”

He sad the price “ceiling would be infinity”.

Asked about that proposal, Daukoru said a price threshold would be “difficult to pinpoint absolutely”.

“Some sort of guiding figure was discussed, but we would not like to discuss that in public,” he said.

Crude prices slipped yesterday, but hovered above $70 a barrel on the New York Mercantile Exchange.

Oil prices are not expected to collapse any time soon, analysts say. Daily global demand is expected to average nearly 85 million barrels a day in 2006 and the world’s producers are believed to have less than two million barrels a day of excess production capacity that could be called upon in the event of a supply disruption.

This thin supply cushion has left the market extremely nervous about any threats to output, such as the West’s diplomatic stand-off with Iran, the war in Iraq, violence in Nigeria and the Gulf of Mexico hurricane season.