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LONDON (Thomson Financial) - OPEC production has risen in the first month of the year according to the Secretary General of the group, Abdalla El-Badri.

OPEC member production, including Iraq which is not included in official production quotas, has risen to 32.1 mln barrels a day from 32 mln barrels.

El-Badri said if the market remains as it currently is the cartel will roll over production quotas in March, despite calls from consumer nations for more oil in the market to cool prices from historical highs. A potential cut, which OPEC price hawks Iran and Venezuela alluded to at last week's production meeting, has also not been ruled out.

"When we look at the fundamentals and we see that the market needs more oil then we will increase production. If there is the more oil than the market needs then we will cut production. At this time the market is stable but it's too soon to say.

"Stocks are now at comfortable levels and we don't see any changes to the fundamentals."

He went on to repeat that the cartel remains concerned about the slowing economic outlook in the US, but remain hopeful demand will remain robust in India and China.

"Will the US economy still affect the other economies? This is the first chance for the world to look at the other economies and see if they have decoupled or not," El-Badri said.

OPEC is also worried about the continued depreciation of the dollar's value, the currency oil is traded in globally, saying that members, "all sell in dollars but buy in euros. They are all hurting."

At the OPEC Summit in Riyadh last November, cartel members were seen discussing the possibility of moving to a basket of currencies, or trading oil in an alternative like the euro. However, no mention was eventually made in the summit declaration, with OPEC's largest member Saudi Arabia cautioning such a switch could do too much damage to an American economy already under duress.

While OPEC has been widely criticized for high oil prices, which have trebled over the last three years, El-Badri pointed out that production costs have risen by more than 50 pct in just the last two years. He maintained, however, that OPEC was not interested in trying to set a certain price level, beyond wishing to see stable markets for producers and consumers.

He also lambasted G7 governments for the amount of tax they put on oil, while continuing to ask the cartel to cool prices, saying, "The income the G7 get from the oil we export is more than the income we are getting for our oil.

"We are willing to exchange. We take their taxes and we give them our oil."

Oil prices remain close to 90 usd a barrel, having topped 100 usd in the early days of the new year, prior to retreating on concerns the economic slowdown in the US could dent demand for crude.

d.sheppard@thomson.com

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