June 4th, 2004 (Bloomberg) -- Venezuela, OPEC's third-largest oil producer, said the group should raise its price targets to counter a depreciating dollar, saying a fair price for oil is in the low $30s a barrel.

Energy and Mines Minister Rafael Ramirez said after the Organization of Petroleum Exporting Countries summit that ministers agreed yesterday to study a Venezuelan plan to raise the target in September. The price band's floor should be about $28 a barrel, up from $22 now, said Ramirez, who declined to specify its upper limit. The top of the range is $28.

``Current prices are extremely high,'' Ramirez said. ``But a price of $28 a barrel is also low. We think that the fair price is a number between the two. We think that a number in the $30s is fair.'' When asked if a fair price would be about $32 or $33 a barrel, Ramirez said, ``That could be.''

OPEC's price index was last at $35.86 a barrel. Venezuela and OPEC countries including Nigeria have said the organization may raise its price band to compensate for a drop in the U.S. dollar, the basis for oil sales. The price of oil has been above the group's price target since Dec. 1.

OPEC yesterday agreed to raise output quotas by 2 million barrels a day as of July 1, with another 500,000 a day to come in August.

Venezuela was the chief architect of the price band, which came into effect in March 2000. For the past four years, the average oil price has been above OPEC's $22 level, at $27.60 in 2000, $23.20 in 2001, $24.40 in 2002 and $28.20 last year.

``When we established the first band, there were differences of opinion but we came to an conclusion,'' Ramirez said. ``The falling dollar is raising our real costs,'' boosting the funds needed to invest in oil fields.

Oil revenue is the principal source of money to pay Venezuela's $22 billion of foreign debt. While most of the debt is in dollars, the government has sold an increasing amount of debt in euros in recent years. As the dollar falls against the euro, it has to find more dollars to pay each euro of interest and principal.

Venezuela is the world's fifth-largest supplier of oil.

To contact the reporter on this story:
Peter Wilson in Beirut through the London newsroom at pewilson@bloomberg.net.

To contact the editor for this story:
Robert Dieterich at rdieterich@bloomberg.net.
Last Updated: June 4, 2004 06:20 EDT