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Sat 2 Feb 2008 07:48 PM

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Opec refuses to pump more oil

Members agree to keep oil supplies unchanged, reject calls to pump more oil amid fears of US recession.

Opec on Friday decided against raising production, despite fears of a looming recession in the US, the world's top consumer of oil.

Opec ministers meeting in Vienna agreed to keep oil supplies unchanged, rejecting calls from consumer countries to pump more oil amid worries that high fuel prices are adding to recessionary pressures in the West.

The decision was widely expected, with a chorus of ministers reiterating ahead of the meeting that the oil market was well supplied, and a small group - Iran and Venezuela - even calling for a production cut at their next gathering on March 5.

Analysts said Opec appeared keen not to repeat its experience of 1997 when it boosted supplies ahead of an economic slowdown and prices collapsed to $10 a barrel.

"I absolutely expect them to consider cutting output in March... To me the only question is will it be a formal cut or... just cut informally," said Mike Wittner, oil analyst at Societe Generale.

"A lot depends of the price itself. If prices drop another $10 it's easier for them to have a formal cut."

Simon Wardell, analyst at Global Insight said Opec could decide next month to cut output by as much as 750,000 barrels per day (bpd) from April 1.

Opec's decision comes as concerns mount the US is headed for a recession after a slew of recent economic data pointed to a deteriorating economy. A major US recession could impact the world economy and with it oil demand and prices.

"Opec will not see their roles as defending economic growth but as that of providing a stable flow of oil at a fair price," said Robin Batchelor, managing director at BlackRock Merrill Lynch Investment Managers.

A gloomy outlook for the US economy has sent many speculative investors, who helped propel oil's rally above $100 a barrel last month, into safer havens.

The US Federal Reserve has sought to ward off a recession by a series of interest rate cuts. It has cut rates by 125 basis points in two tranches in the last nine days.

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