OPEC panel backs current production

VIENNA, Austria -- A key OPEC subcommittee recommended Tuesday that the group's current production levels be maintained until at least next March, making it likely that consumers will pay more to heat their homes this winter.

The group's ministerial monitoring subcommittee, meeting one day before a gathering of all the OPEC members, backed a continuation of production cuts totaling 4.3 million barrels of crude oil a day that have been made over the past two years. Those cuts have caused fuel prices to surge since February.

But while the subcommittee appeared solid in its support for lower output and higher prices, OPEC's unity showed widening cracks amid a three-way fight over the post of OPEC secretary general. Iraq unexpectedly named its own candidate, vying against candidates from Iran and Saudi Arabia.

The political fight threatened to weaken the solidarity that the Organization of Petroleum Exporting Countries has taken pains to build since last March, when along with major non-OPEC producers like Russia and Mexico, it made deep production cuts to try to lift world oil prices from 12-year lows.

The election appeared to preoccupy oil ministers of the Organization of the Petroleum Exporting Countries ahead of their semiannual meeting on Wednesday.

"What they should be discussing is expanding production because the market is overheating and has been for some time," said Leo Drollas, chief economist at the Center for Global Energy Studies in London.

In a step timed to coincide with the meeting, Sen. Charles Schumer, D-N.Y., sent a letter Tuesday to President Clinton and Energy Secretary Bill Richardson, asking them to sell crude from the U.S. strategic petroleum reserve to help relieve surging oil prices in the United States.

Schumer described OPEC's apparent refusal to increase output as "nothing less than economic warfare."

The OPEC subcommittee, which met Tuesday, included oil ministers from Iran, Kuwait and Nigeria along with current OPEC Secretary General Rilwanu Lukman. It decided to recommend to all of OPEC's members that current quotas should stay in place "until at least March 2000," said Iranian Oil Minister Bijan Namdar Zangeneh.

Zangeneh told reporters the subcommittee also determined that group members were more than 90 percent compliant with output cuts in August and that compliance in September should be even better.

OPEC's apparent resolve to continue pumping less oil bodes poorly for consumers, who already are paying higher prices to drive their cars and heat their homes.

"The prices now in the market are normal," Iraq's Oil Minister Amer Mohammed Rasheed told reporters upon arrival.

Libyan Oil Minister Abdalla Salem El-Badri suggested prices must rise even higher before OPEC can boost output. OPEC produces more than 26 million barrels of crude each day, at least 35 percent of the world's total.

Contracts for U.S. benchmark light sweet crude oil closed Tuesday in New York at $24.46 a barrel, more than double the year's low price of $11.26, set Feb. 17.

Average retail prices for a gallon of gasoline in the United States stood at nearly $1.32 a gallon this month, up from less than $1 in February, according to the Lundberg Survey of 10,000 stations.

And heating oil prices in the United States are expected to average about $1.04 per gallon this winter, up from 80 cents per gallon last year, the U.S. government estimated earlier this month.

"This price (level) is good, we think, for both sides of the market," Zangeneh said, adding that OPEC needed to see "a considerable drawdown" in global oil inventories before increasing its output.

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