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Tue 26 Feb 2008 03:44 PM

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Opec president rules out production hike

Economic slowdown in US and seasonal fall in consumption will hit demand, Chakib Khelil says.

Opec president rules out production hike
RULED OUT: Chakib, pictured, said Opec would not increase output at its next meeting. (Getty Images)

A combination of economic slowdown in the US and a seasonal fall in consumption will hit oil demand and Opec will not increase output when it meets next week, the producer group's president said on Tuesday.

"I can tell you they are not going to increase production because there are plenty of stocks," Opec President Chakib Khelil told newswire Reuters.

"Gasoline stocks are high, then we have a second quarter reduction in demand and with the economic situtation in the US, probably a recession, demand will definitely fall, maybe not by much."

Oil demand typically eases in the second quarter following the end of the northern hemisphere winter and refiners often take advantage of the drop in consumption to carry out maintenance.

Khelil said world oil demand fell by around two million barrels per day (bpd) on average in the second quarter.

Adding to comment from other ministers and oil executives, he said that if refiners asked for less crude from April onwards, Opec would supply less.

"If we are not able to sell our crude, then definitely we are not going to supply more," Khelil, who is also Algeria's energy and mines minister, said on the sidelines of a gas conference in Abuja.

With oil prices close to $100 a barrel, Opec will be under pressure when it meets on March 5 in Vienna to refrain from a formal cut in output.

But the group, that is producing above its agreed output target, could still reduce the amount of oil it supplies to customers.

US oil prices hit a record of $101.32 a barrel last week.

Khelil said Algeria was producing around 1.4 million bpd, slightly above its target of 1.357 million bpd.

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Steve Franks 12 years ago

OPEC cannot increase demand because the reserves are not there to supply the demand. The United States oil reserves are non existent and Saudi Arabia's reserves are running out, 60-70 percent water return using the water and gas injection system. Iraq has the second largest oil reserves in the world and they have not started the water and gas injection system into their fields, and it would take 4-5 years of construction, using the United States technology to bring the water and gas injection system on line. Therefore the demand for oil will continue to be high and the supply will continue to be non-available. The invasion of Iraq is just the beginning of the wars for oil. Why don’t OPEC and the major oil supplier just tell the truth?