VIENNA, Jan 3: The Organisation of Petroleum Exporting Countries (Opec) could hike production by at least 500,000 barrels a day if prices remain above $29 a barrel after January 15, an Opec source told AFP on Friday.

If the oil prices continue between 29 and 30 dollars then we might have a good case in support of an increase in production, the anonymous source said from the cartel’s Vienna headquarters.

Opec agreed to a price band mechanism in March 2000 under which the cartel would raise output by 500,000 barrels per day if prices remain above the range of $22 to 28 for more than 20 consecutive trading days.

By the same token, OPEC would cut output by the same quantity if prices fell below 22 dollars for 10 consecutive days.

According to the price mechanism we might increase by 500,000. Will 500,000 be sufficient to calm the market? That is another issue which the ministers will have to tackle, the source said.

On Friday the Opec basket price had been over $28 for 12 working days and the limit of 20 working days will expire on January 15.

Even after the 20th day it doesn’t just mean that we will trigger the mechanism, the source stressed, adding: We might think that it is an artificial hike in oil prices.

But all indications point towards that direction, that Opec might be inclined to trigger the mechanism, because I think no one is expecting prices to go down any time soon, he added.

He said the price band mechanism could be activated over the telephone and that there would be no need for an extraordinary meeting of Opec ministers.

Consultations have to precede the trigger of the mechanism. What are the real reasons behind the unusual increase in the oil price? It could take a couple of days after the 20th day to trigger the mechanism, it could take longer or shorter, we don’t know yet, the source said.

Oil prices have been surging for weeks as US oil stocks deplete, a general strike has cut exports from Venezuela and fears grow of an imminent war in Iraq.

In December Ali al-Nuaimi, oil minister for Saudi Arabia, the world’s biggest oil exporter and Opec’s driving force, pledged to trigger the mechanism to bring oil prices back into the $22-to-28 price band the cartel has set itself.

Should the price continue (to stay above $28), the price band mechanism will be implemented like we have done in the past, he said on the sidelines of a meeting of the Arab members of Opec in Cairo.

But David Thomas, a Commerzbank analyst, said investors do not really believe Opec’s promises, thinking the cartel will simply continue current production levels, which exceed the limits it has set itself.

The Opec source said the time had not yet come to act. We still have eight days to go and eight days are a long time, anything could happen. It’s a very sticky and risky thing because it could go either way, he said. —AFP