Fri, Jun 04, 2004 - Page 1 News List

OPEC agrees to boost production by 2 million bpd

REUTERS , BEIRUT

OPEC yesterday agreed to raise output by 2 million barrels a day (bpd), or 8 percent, in a bid to ease oil prices from US$40 a barrel, Qatari Oil Minister Abdullah al-Attiyah said.

The deal by the 11-member organization also promises to add a further 500,000 barrels a day in August, Attiyah said.

Ministers were scheduled to ratify the pact at a formal session later yesterday. The cartel will meet again on July 21 to review policy.

"It's a good agreement, we will be able to test the impact of the policy on the oil market before we meet again in July," Attiyah said.

The deal raises formal group output limits to 25.5 million bpd and appears to be a compromise between Saudi Arabia and countries like Iran and Venezuela.

OPEC's biggest producer, Saudi Arabia, had pressed for 2.5 million barrels daily immediately but others were worried about a price crash. Riyadh wants to prevent high oil prices derailing world economic growth and stunting world fuel demand.

Oil prices rose as traders interpreted the outcome as less crude than was expected.

"If this is ratified it is bullish," said Nauman Barakat of brokers Refco in New York. "Forget the promise of another 500,000, this is just plain 2 million. The market was convinced it would get 2.5 million so this could wave a red rag to the bulls."

US crude was trading yesterday evening at US$40.38 a barrel.

Oil prices have been around the US$40 mark for the past three weeks, fuelled by strong world economic growth and worries about supply security.

The details of OPEC's final agreement are unlikely to make much difference to actual supplies from the cartel that controls more than half the world's oil exports.

That's because group output already is at least 2.3 million over existing formal limits of 23.5 million bpd.

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