Chavez Calls for Cut In Oil Production

OPEC Won't Agree, Analysts Predict

CARACAS, Venezuela, May 29 -- Venezuelan President Hugo Chavez is pushing for an cut in oil production as he hosts an OPEC meeting this week, but he appears to be a lone voice as other members of the cartel will probably want to keep output unchanged to temper soaring prices.

Exacerbated by the Iranian nuclear dispute, oil prices remain above $70 a barrel, and the United States, the world's largest energy consumer, is expected to drive up demand in coming months when it heads into summer driving and hurricane seasons.

Analysts say the Organization of Petroleum Exporting Countries is likely to avoid being seen as trying to drive up prices any further, when there are already mounting fears of disruptions to the oil supply.

"It would be a very bad signal to cut quotas" with prices around $70 a barrel," said Frederic Lassere, an analyst for SG Securities in Paris. "From a political point of view . . . it would be very, very difficult to justify to the consumers."

OPEC has maintained its official output ceiling at 28 million barrels a day since July 2005.

The United Arab Emirates' oil minister, Mohamed al-Hamili, said Monday that he expects OPEC to maintain that ceiling when it meets Thursday in Caracas.

The 11-nation producers' group, however, may find it difficult to take any action to moderate oil prices.

Maintaining or increasing output does little to address the factors behind the current run-up, which include a lack of refining capacity, a larger worldwide run on commodities, and geopolitical tensions, Lassere said.

"I don't see what kind of decision would have any impact on the price in the current context," he said. "The market is not asking for more crude."

Venezuelan Oil Minister Rafael Ramirez justified a production cut on Monday, saying the market was well-supplied and that oil inventories are above historical highs.

He said OPEC should "at least maintain" output but added: "If we were to base it on the fundamentals of the market, we should propose a production cut."

Ramirez later acknowledged that oil prices are above acceptable levels but said that was occurring for "reasons that are fundamentally geopolitical," such as violence in Iraq and Iran's nuclear issue.

A founding member of OPEC with Saudi Arabia, Venezuela has consistently been one of the cartel's strongest price hawks.

Chavez also played a key role in getting OPEC members to abide by production quotas that have helped reverse prices from roughly $10 a barrel when he took office in 1999, which subsequently quadrupled Venezuela's oil export revenues.

Chavez has called $50 a barrel a fair price for oil -- a level also backed by the UAE's Al-Hamili on Monday.

Also under close watch as OPEC gets underway will be a meeting on Iran's nuclear impasse the same day by top international negotiators in Vienna, Austria.

U.S., Russian, Chinese and European officials are expected to approve incentives to reward Iran if it gives up uranium enrichment. But the agreement could also open the way for economic sanctions if Tehran refuses.