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- LONDON (Reuters) - Stunned
OPEC producers were left groping in the dark on Tuesday after a shock Saudi
announcement that the kingdom was preparing to boost oil output.
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- Just 10 days after an OPEC pact to raise output for the
second time this year, the world's biggest oil exporter suddenly vowed
to unleash more barrels to send oil toward the cartel's $25 target.
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- Saudi Oil Minister Ali al-Naimi late on Monday announced
through the official Saudi Press Agency that the kingdom would spearhead
an increase of 500,000 barrels a day if high prices did not ease in the
next few days.
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- An OPEC source said Saudi Arabia -- OPEC's biggest producers
and holder of vast spare output capacity -- was prepared to act alone if
other producers did not have the oil muscle to deliver fresh supplies.
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- Saudi Arabia holds most of OPEC's spare capacity. Kuwait
and the United Arab Emirates are the only other cartel producers that can
currently resort to spare capacity but their capabilities pale in comparison
to the kingdom's.
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- All fellow OPEC states could do when waking up to news
of the Saudi statement on Tuesday was wait for the dust to settle.
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- Iran, OPEC's second largest producer, refused to even
acknowledge the official Saudi statement, saying reports of a possible
unilateral output hike were ``not true'' and ``news hype.''
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- An Iranian oil ministry source, quoted by the official
Iranian news agency, said that OPEC members who agreed to a production
hike in a June 21 meeting had pledged to work together of future output
policy.
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- ``When an OPEC production increase has been legally determined,
there is no reason to violate agreements and succumb to lawlessness and
act unilaterally,'' the ministry source said.
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- Saudi Arabia had made abundantly clear in recent weeks
that it wanted to cut $5 a barrel from prices now at $30.
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- But its new initiative was kept under wraps, even over
the weekend when Saudi Crown Prince Abdullah and Kuwait's Emir Sheikh Jaber
al-Ahmad al-Sabah sealed a border deal and later performed a traditional
Gulf Arab sword dance to celebrate the agreement between the close regional
allies.
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- ``I have no knowledge about this issue,'' said Kuwait's
Oil Minister Sheikh Saud Nasser al-Sabah on Tuesday morning.
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- ``We work with the OPEC consensus...This requires consultations
with other producing countries,'' added the Kuwaiti minister, who met with
Naimi during the weekend festivities in Kuwait.
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- OPEC's Venezuelan President, Ali Rodriguez, said he had
no knowledge of the Saudi plan.
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- Some In Opec Applaud Saudi Move
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- Privately however, senior delegates from some member
nations applauded the Saudi move.
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- ``The market needed a clear signal that stocks would
be replenished,'' said a delegate from an Arab OPEC member nation.
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- ``We think it is a very good thing as high prices were
not good for us. But we do hope and expect that when prices fall toward
$25 the Saudis will quickly withdraw their 500,000 barrels,'' he added.
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- The Saudi decision also stirred emotion in Iraq, even
though the country has no official OPEC allocation because of U.N. sanctions
imposed for its 1990 invasion of Kuwait.
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- Baghdad condemned the Saudi move, saying no country should
violate consensus within OPEC.
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- Non-OPEC Mexico was the one key producer not surprised
by the Saudi move. An ally in managing the market in recent years, officials
in Mexico say it was approached about lifting output but has made no decision
yet.
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- It was clear later on Tuesday that Naimi was working
the telephones to assure several OPEC ministers Saudi Arabia would continue
working within OPEC on oil matters.
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- ``Mr. Naimi assured me in a telephone conversation he
had with me today that Saudi Arabia will continue to act within OPEC frameworks
and will not move outside them,'' Iranian Oil Minister Bijan Zanganeh told
reporters.
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