Jan. 30 (Bloomberg) -- OPEC plans to keep production near a 26-year high in the second quarter after most members said prices were too high to warrant an output cut, Saudi Arabia's oil minister said.

``Yes, all agreed,'' Ali al-Naimi told reporters today after meeting with ministers in Vienna before tomorrow's full OPEC conference. ``We are in agreement mode.'' Seham Abdul Razak Razzouqi, Kuwait's delegate to the meeting, also said all members were agreed. The group meets again in March.

OPEC is pumping almost as much as it can as demand climbs, production growth slows in Russia and output remains curtailed in the U.S. after last year's hurricanes. Tensions over Iran's nuclear research program and rebel attacks against oil sites in Nigeria have supported the price, which last week reached $69.20 a barrel in New York, the highest in more than four months.

The 11-member group, producer of more than a third of the world's crude, typically cuts production in the second quarter, anticipating a decline in demand as northern hemisphere temperatures rise, reducing the need for heating. Surging use from developing economies such as China and India in the past two years has tempered the seasonal consumption drop.

Economic Growth

``Growth, economic growth'' is driving demand, al-Naimi said yesterday, arriving from Hong Kong after a visit with Saudi Arabia's King Abdullah to Asia, including stops in China and India.

Saudi Arabia, the world's largest oil producer, said economic expansion in China and India will spur additional demand for energy this year.

OPEC President and Nigerian oil minister Edmund Daukoru said the ``market is in balance.''

``We have to present our findings to the conference tomorrow so you will know the outcome, but we do think the market is in balance,'' he said today. ``We are unanimous in our view of the market. We are a bit uncomfortable with the price.''

Qatar's oil minister, Abdullah bin Hamad al-Attiyah, said a drop in prices may trigger a cut at OPEC's March 8 meeting.

``They are concerned about the fundamentals,'' Herman Franssen, president of International Energy Associates Inc., a Maryland-based consultant, said in an interview in Vienna. ``They will probably take a look at that when they get together in March.''

`Ready to Cut'

Most OPEC ministers don't want the price to fall below $50 a barrel, Libya's Energy Secretary Fathi Ben Shatwan said.

``As it is now, with prices high, then there's no point in having a cut'' in production in March, he said today in Vienna.

The price today added 64 cents to $68.40 a barrel at 7:45 p.m. London time on the New York Mercantile Exchange. Oil has climbed 42 percent in the past year.

``All options are open'' on quotas when OPEC meets again,'' said Qatar's al-Attiyah.

Global supply will outweigh demand by 2 million barrels a day in the second quarter, Venezuela's Rafael Ramirez told reporters today. Ramirez said U.S. pressure on Iran over its nuclear program was lifting prices.

``We have to be ready to cut'' in March, he said. ``If the U.S. insists on putting pressure on Iran, the price will be maintained.''

Ramirez said a March cut should be 1 million barrels a day.

``We will look at the conditions of the market and we'll decide collectively,'' Iran's oil minister, Kazem Vaziri- Hamaneh, told reporters through a translator upon his arrival in Vienna today.

Nuclear Standoff

Oil averaged $56.70 a barrel in New York last year, a 37 percent increase over 2004. The price reached a record $70.85 a barrel in New York on Aug. 30, the day after Hurricane Katrina crashed into the U.S. Gulf of Mexico coast, disrupting output from rigs, platforms and refineries.

OPEC lacks the excess capacity to make up for a large interruption of exports from Iran, which sends about 2.6 million barrels a day abroad. Saudi Arabia, OPEC's largest producer, is the only member of the oil-producing group that can increase output, with an extra margin of about 1.5 million barrels a day.

The European Union pressed Iran to stop its nuclear program and joined the U.S. in seeking Russian and Chinese support for sanctions against the Islamic nation.

The United Nations nuclear watchdog will decide this week whether to refer the country to the Security Council for possible sanctions. Sanctions could reduce investments that Iran, the world's fourth-largest crude producer, needs to increase output. Iran could retaliate by curbing exports.

`Tight' Market

Nigerian militants kidnapped four foreign oil workers on Jan. 11 from a Tidewater Inc. supply ship near a field run by Royal Dutch Shell Plc's venture in Nigeria. The hostages were released to the Bayelsa state government earlier today and flown to Abuja, Nigeria's capital, to meet with President Olusegun Obasanjo.

The violence that started on the day of the kidnapping has forced Shell to halt production of 221,000 barrels a day, about 9 percent of the West African nation's output.

``The physical market is fairly tight,'' Roger Diwan, director of global oil markets for PFC Energy, said today in an interview in Vienna.

OPEC pumped 29.9 million barrels a day in December, according to data compiled by Bloomberg.

Growth in oil demand will accelerate by 2.2 percent in 2006, led by demand from China, the International Energy Agency said in a report on Jan. 17. The economic expansion in China and India will add additional demand for energy this year, the IEA said then.

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, the IEA, a Paris-based adviser to 26 consuming nations, said.

To contact the reporters on this story: James Cordahi in Vienna on at cherifcord@bloomberg.net; Jim Efstathiou Jr. in Vienna at jefstathiou@bloomberg.net

Last Updated: January 30, 2006 14:48 EST