Fuel prices in line for double whammy

By CHRIS DANIELS

New Zealand fuel pump prices are poised to receive a two-pronged assault, with the local currency dropping and Opec about to cut production.

Opec members, which supply a third of the world's oil, are trying to protect earnings, which have been hit by the falling US dollar.

The cartel will cut output quotas by 1 million barrels a day on April 1, ministers for Venezuela and Qatar said in Cairo.

New Zealand's strong dollar has in the past year protected local fuel buyers from the worst of the increase in world prices, but the weak state of the US currency has hurt oil exporters.

Since 2000, Opec has officially sought prices of US$22 to US$28 a barrel for an index of seven crude oils.

The price has exceeded its official range since early December and was at US$31.95 a barrel on Thursday.

In December, Opec for the first time linked oil prices that are now above the target to the weaker dollar. Oil-producing countries sell oil for dollars and buy products using other currencies.

Opec has argued that the dollar's drop against the euro and the yen in the past year justifies higher prices. The group next meets on March 31.

Nigeria, Opec's fourth-largest producer, said the group may consider raising its prices because the dollar has weakened and current prices are not hindering economic growth. The dollar has dropped 12 per cent against the euro in the past year.

Last month, Opec pledged to eliminate oil output that members now pump above their quota and to lower the quota on April 1 to 23.5 million barrels a day.

The move will cut Opec's output by almost 10 per cent, or 2.5 million barrels a day.