Jan. 31 (Bloomberg) -- OPEC's plan to keep oil production close to a 26-year high, a decision the group is expected to approve today, probably won't lower prices as demand rises and concern mounts that supplies from Iran will be reduced.

``I don't think it will have any effect, because it's just keeping everything as it is,'' Fathi Shatwan, Libya's energy minister, said today at OPEC's meeting in Vienna. ``As we know, the problem of high prices is not due to fundamentals, it's due to some of the problems in Iran, Nigeria and others.''

Oil has climbed 12 percent this month to more than $68 a barrel in New York, bolstered by tension over Iran's nuclear program and attacks by militants on Nigerian oil sites. Export revenue for the Organization of Petroleum Exporting Countries will probably top $500 billion this year as most members pump as much as they can to satisfy rising consumption in China and India.

``Oil demand in 2006 is going to grow quite strongly,'' said Francisco Blanch, a senior oil strategist with Merrill Lynch & Co. in London. ``There's very little spare capacity to deal with supply shocks. The market is still concerned that if we lose Iran, we're going to be in real trouble.''

Saudi Arabian Oil Minister Ali al-Naimi told reporters yesterday that OPEC members were ``all agreed'' on keeping quotas unchanged at today's meeting in Vienna. OPEC president Edmund Daukoru, who is also the Nigerian oil minister, today said there was no proposal to cut output at the meeting.

Ministers including Qatar's Abdullah bin Hamad al-Attiyah said the group may have to cut output later, should prices drop before a meeting in March.

OPEC Output

OPEC, which pumps more than a third of world oil supply, last agreed to reduce its official production quota on Feb. 10, 2004. It reversed its decision later that year as Chinese demand kept prices rallying.

The 10 OPEC members outside of Iraq target production of 28 million barrels a day. All the members pumped 29.9 million barrels a day in December, near a 26-year high, according to data compiled by Bloomberg.

Prices have doubled during the past two years, reaching a record $70.85 a barrel in New York on Aug. 30, the day after Hurricane Katrina slammed into the U.S. Gulf of Mexico coast, disrupting output from rigs, platforms and refineries. The price today rose 5 cents to $68.40 a barrel.

China's Demand

Oil demand in China, the largest consumer after the U.S., will average 7 million barrels a day in 2006, a 5.9 percent increase over last year, according to the Paris-based International Energy Agency. Al-Naimi accompanied Saudi King Abdullah last week on a trip to Asia, including stops in China and India.

Chinese demand is growing at a faster pace than last year, when it rose 2.9 percent. Demand soared 15 percent in 2004. India and China are Saudi Arabia's third- and fourth-largest customers in Asia, and the continent makes up 60 percent of the oil producer's export market.

``Asian demand is strong,'' the United Arab Emirates oil minister, Mohamed bin Dhaen al-Hamli, said yesterday in Vienna. ``There are indications it's picking up.''

Across Vienna from OPEC's headquarters, board members of the International Atomic Energy Agency will meet on Feb. 2 to discuss whether to refer Iran's nuclear program to the United Nations Security Council for possible sanctions.

Russia and China agreed to back the referral, joining the U.S., U.K., France and Germany, a joint statement released by the U.S. said today after a meeting in London of the foreign ministers of the five permanent members of the Security Council, plus Germany's foreign minister.

Iran's Intentions

The ministers ``agreed that this week's Extraordinary IAEA Board meeting should report to the Security Council its decision on the steps required by Iran,'' the statement said.

U.K. Foreign Secretary Jack Straw said Jan. 28 that it's ``prudent to assume that Iran is seeking to develop a nuclear weapons capability.'' Iran says it only wants civil nuclear power, not weapons.

``The negotiating process has reached an impasse,'' French Foreign Minister Philippe Douste-Blazy said yesterday after meeting his counterparts from the 25-nation European Union. ``The intervention of the Security Council is now necessary.''

Sanctions may reduce foreign investment in Iran's oil fields, or a retaliatory cut in exports by Iran, analysts speculate. The country is OPEC's second-biggest producer, pumping 3.91 million barrels a day.

Industry Profits

Referring Iran to the Security Council would have a ``very big effect'' on the oil market, said Libya's Shatwan. ``Everybody is frightened that something will happen and they want to secure their supply.''

Nigerian militants yesterday released four foreign oil workers who were kidnapped on Jan. 11 from a Tidewater Inc. supply ship near a field run by Royal Dutch Shell Plc's venture in the country. The violence that started on the day of the kidnappings has forced Shell to halt output of 221,000 barrels a day, about 9 percent of the Nigeria's supply.

Demand for oil boosted profit across the industry. Exxon Mobil Corp., the world's largest publicly traded oil company, yesterday said fourth-quarter earnings surged 27 percent to $10.7 billion, capping the most profitable year for a company in U.S. history.

Venezuelan Oil Minister Rafael Ramirez said world output may be running some 2 million barrels a day ahead of demand in the second quarter and OPEC may need to cut 1 million barrels a day in March.

Possible Cut

``Maybe in March, we will have'' a cut, if prices fall to $50 a barrel, Qatari minister al-Attiyah said yesterday. ``I am confident there is no shortage of oil. We are discussing how to deal with the second quarter.''

U.S. crude oil supplies are up 8 percent from a year ago and 4.5 percent since September, when Hurricane Rita struck.

Any cut would need the support of Saudi Arabia, which is already pumping 400,000 barrels a day more than its quota. Iran and Venezuela, the next largest producers, can't produce their quotas.

``They've been wrong the last two years about what the second-quarter fundamentals are going to look like,'' Yasser Elguindi, a strategist at Medley Global Advisors, said in an interview in Vienna. ``Fundamentally speaking, it's probably not a good ideal to pre-empt the market.''

To contact the reporters on this story: James Cordahi in Vienna on at cherifcord@bloomberg.net; Maher Chmaytelli in Vienna at mchmaytelli@bloomberg.com

Last Updated: January 31, 2006 05:06 EST