OPEC meeting to decide on Oil production

Rising oil prices have forced OPEC oil ministers to meet and decide on whether or not to increase oil production.

Global Crude oil prices have touched a new record high of almost $80 per barrel. OPEC ministers are meeting in Vienna on Monday, under a great pressure from countries to control these fast rising prices.

OPEC produces about one third of world crude oil supplies.

Saudi Arabia, the largest oil producing country, is in favor of increasing the oil production from 500,000 barrels per day to 1.0 million bpd and is likely to try and convince its reluctant partners of the need of increasing the production. Under usual practice, the oil ministers hold a series of private bilateral talks in their luxury hotels. A formal meeting will be held on Tuesday where all the ministers will be present and final decision will be taken.

Although Saudi Arabia has a strong opinion of increasing the production, it faces tough opposition from Qatar. Qatari Oil Minister Abdullah bin Hamad al-Attiyah said that the main dilemma in the minds of OPEC countries is that it may lead to decrease in demand of oil as the global economic growth is slow.

"What if I increase oil (production), and nobody will buy it?" said al-Attiyah, who is in favour of keeping production unchanged. He said that at this point the economy of USA, one of the major consumers, is not very strong and in case of increase in production, an overproduction crisis can occur.

"We don't want the world economy dragged (by oil prices)," said al-Attiyah. "We know if the US catches a cold then we will start coughing."

The major cause of worry for the OPEC is US housing sector, which in the recent times has caused big losses to banks and this falling economic growth is causing some people to believe about a recession in US.

This kind of crisis is not a new thing for OPEC. In 1997, OPEC had increased the production taking the Asian financial crisis into consideration and had suffered major losses as the prices came down to as low as 10 dollars a barrel in 1999 because of the falling demand.

Qatar, Iran, Kuwait, United Arab Emirates and Libya are in favor of keeping the production constant, as they think that market is adequately supplied with the oil as per demand but the main player Saudi Arabia has said it is in favor of increase. So, if Saudi tries to force any change, it will have to face tough opposition.

"I don't think there should be an output increase. I don't think the market needs that for the time being," Shukri Ghanem, head of Libya's National Oil Company, said on his arrival in Vienna.

Experts are of the view that if this rift continues, this can lead to a new all time high prices, which can even be above $80 a barrel.