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OPEC unlikely to cut output

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With oil prices still in record territory, OPEC is unlikely to alter its policy of pumping at full capacity when it meets in Vienna, Austria, next week, rejecting for now suggestions by Iran and Venezuela that it must cut its output to keep prices from dropping.

Given the geopolitical tensions that have jerked oil markets in recent weeks, members of the Organization of the Petroleum Exporting Countries have taken pains to assure the world that they will keep ample supplies on the market.

Still, some analysts said that OPEC might defer a decision to cut production until sometime in the second quarter, a time when demand typically slows, in order to keep prices above $55 a barrel.

Since the beginning of the year, the biggest concern for global oil supplies has been the standoff between the Western powers and OPEC's second-largest producer, Iran, over its nuclear program.

Analysts fear that if the confrontation escalates, it might disrupt Iranian oil exports and send prices skyrocketing. Oil closed Friday at $67.76 a barrel, up 7.3 percent since the beginning of 2006.

Friday, Ali al-Naimi, Saudi Arabia's oil minister and OPEC's most influential member, ruled out the possibility of a change in policy at Tuesday's meeting. He said Saudi Arabia, OPEC's top producer, would fill any shortfall that might occur.

OPEC's members have increased their output to 30 million barrels a day to meet growing consumption around the world. That leaves the group with only 1.7 million to 2 million barrels of untapped capacity, mostly in Saudi Arabia, in case of shortages or emergencies.

That scarcity of spare oil capacity is a big reason oil futures markets have been so volatile.

Shortages in production, as well as in refining capacity, have left OPEC producers with little they can do to bring oil prices down — even if they wanted to. But the group could arguably contribute to higher prices if it chose to pare its production.

The last time OPEC cut its output was in February 2004. Oil prices have since doubled.