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Mon 8 Sep 2008 10:45 AM

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OPEC ministers worry about supply, set for no change

UPDATE 1: Kuwait says no need to cut while Iran, Venezuela push for output reduction.

OPEC ministers on Monday voiced concern about swelling supplies after oil prices touched a five-month low, but they stopped short of calling for immediate action to rein in supply.

The 13-member Organization of the Petroleum Exporting Countries (OPEC) has publicly kept production targets steady all year and most analysts predict it will continue to do so at its meeting on Tuesday.

"There is some concern about future supply and demand, but it is too early to say if there is going to be an imbalance," a senior Gulf source told newswire Reuters.

Oil prices, which hit an all-time high of $147.27 in July, have since fallen by nearly 30 percent to less than $105 a barrel on Monday, its weakest since early April.

Prices could rebound this week depending on Hurricane Ike, which forecasts said might head for energy infrastructure in the Gulf of Mexico.

For producer countries, the impact of the oil price fall on their revenues has been offset by a stronger US dollar, which on Monday reached an 11-month high against the single European currency.

"We do think there is no need to cut," Kuwait's Oil Minister Mohammad Al-Olaim said on Monday, although he added oil inventories were growing.

OPEC's President Chakib Khelil also said there was plenty of oil in the market and set the stage for a possible output revision at OPEC's next planned meeting, which he will host in Algeria in December.

"We're going to have an over-supply by the end of year," said Khelil, who is also Algeria's energy and mines minister.

The surplus could be anything from half a million to 1.5 million bpd by early next year, he added.

Iran, which together with Venezuela has repeatedly called for high prices of around $100 a barrel, has come closest to asking for a cut at Tuesday's meeting.

"Of course, of course. I believe that the market is over-supplied," Iranian Oil Minister Gholamhossein Nozari told reporters on arrival in Vienna early on Monday.

But he would not be drawn on the outcome of Tuesday's meeting.

Even if OPEC leaves existing targets intact, that leaves the group scope to reduce supply by enforcing stricter compliance.

"As a first step we need some discipline. Some members are producing above their commitment," Iran's OPEC governor Mohammad Ali Khatibi told Reuters on Monday.

OPEC is estimated to be producing 790,000 barrels per day above a collective ceiling of 29.67 million bpd for its 12 members with output limits.

Saudi Arabia, which could be pumping as much as 750,000 bpd above its target, is responsible for most of the extra crude.

Ali Al-Naimi, the kingdom's oil minister, was not expected to arrive in Vienna until the early hours of Tuesday. (Reuters)

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