UAE suggests OPEC raise oil production

With the price of gas over $2 per gallon in U.S., the cartel will discuss the possibility of relief in the coming weeks.

ABU DHABI, United Arab Emirates - Oil prices slipped Tuesday as support seemed to be gathering among OPEC members to raise their cap on crude production at a time when many U.S. motorists are paying more than $2 for a gallon of gas.

United Arab Emirates Oil Minister Obaid bin Saif al-Nasseri said Tuesday the UAE believes the Organization of Petroleum Exporting Countries should increase its production to match the global demand for oil.

But Nasseri declined to give figures when he spoke to reporters, leaving open the question of whether the UAE endorses the Saudi proposal for a 6 percent rise in OPEC's production or would like to see a bigger increase.

With oil approaching $42 a barrel this week, analysts have said the cartel needs to pump more crude to lower prices.

Nasseri said the Saudi proposal would be discussed at OPEC's emergency meeting in Amsterdam this weekend, but a decision would be taken only at the scheduled OPEC meeting in Beirut on June 3.

In trading Tuesday, light sweet crude for June delivery fell by as much as $1.20 to $40.35 a barrel before recovering slightly to $40.54, down $1.01. Brent crude from the North Sea fell 96 cents to $36.95 on London's International Petroleum Exchange.

On Monday the Energy Department reported that the price of unleaded gasoline last week averaged $2.017 per gallon, up 7.6 cents from the previous week. That was the first time the national average topped $2, the agency said.

OPEC, which produces about a third of the world's oil supply, currently has a production ceiling of 23.4-million barrels a day. But members break their quotas and are believed to be producing a total estimated at about 2-million barrels above the ceiling.

The UAE would increase its production, but it has only "limited" capacity to do so, Nasseri said. The UAE's quota under OPEC is 2.051-million barrels a day. Independent market surveys say that last month its production was about that level.

Asked about high oil prices, Nasseri said: "If we were to compare them with 1991 prices, we would find the real value of the oil price is $25 a barrel . . . considering the inflation rate and the fall of the (U.S.) dollar."

Speaking after talks with the French trade minister, Nasseri said he had told his visitor that OPEC is striving to stabilize the oil market.

Last week, Saudi Arabia's oil minister said his government would urge OPEC to raise its production ceiling by 1.5-million barrels at the June meeting. However, analysts have said this will be insufficient to cool prices because OPEC already over-produces by more than this.

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