OPEC hesitates over more oil as price slides

VIENNA, Monday (Reuters) OPEC oil producers wavered over a supply increase that would aim to allay consumer country concerns about energy security after Hurricane Katrina pushed crude over $70 a barrel.

Under pressure from importing nations, the Organization of the Petroleum Exporting Countries begins a two-day meeting that could lift output just as fuel demand starts to buckle under the impact of high prices. U.S. crude has fallen from a record $70.85 a barrel in the three weeks since Katrina tore into U.S. Gulf refineries, losing $1.75 on Friday to close at $63.

"For OPEC the price is still very high," OPEC President Sheikh Ahmad al-Sabah told reporters in Vienna. He met on Sunday with European Union Energy Commissioner Andris Piebalgs to stress that OPEC wanted to prevent inflated energy costs slowing the global economy. "We are trying our best to come up with a positive framework to reassure markets about supply and to calm down prices which have started to have a negative effect, even if slightly, on economic growth," the OPEC president said.

Ministers are discussing raising output by 500,000 or 1 million barrels a day. But a third option was gaining ground that would see production left unchanged with a vow to release spare capacity when the market can absorb it.

Some said they were reluctant to sanction additional crude when global refining is too stretched to process more.

"The market should rest assured that whatever it needs is there. Before that there is no need to do anything," said Nigerian Oil Minister Edmund Daukoru.

With nearly 900,000 bpd of U.S. refining still shut after Katrina the only producer able to pump more, Saudi Arabia, cannot find buyers.

"The talk of an increase is mainly to give comfort to the market," said Daukoru. "It is refining capacity we have to worry about."