VIENNA, Austria - OPEC will increase its oil production target by 1 million barrels a day later this year in a move widely viewed as more symbolic than significant, given that the cartel has been exceeding the new output limit since the beginning of the year.
Kuwaiti Oil Minister Sheik Ahmad Fahad al-Ahmad al-Sabah said Wednesday the cartel agreed to the decision to raise output by nearly 4 percent, adding it would take effect Nov. 1.
"We will give a signal to the market that we are working hard for the stability of the market," he said.
"It's a gesture of goodwill to the consumers that we want lower prices," Algerian Oil Minister Chakib Khelil said.
But Leo Drollas, chief economist at the London-based Center for Global Energy Studies, said the decision was irrelevant.
"It's a PR exercise to prove to the consumer that OPEC actually likes them, " he said. "It's not going to help the market at all."
The move will increase OPEC's self-imposed output limit for all its members, except Iraq, from 26 million barrels a day to 27 million barrels, but the cartel is already producing 27.4 million barrels and accounts for one-third of the world's oil supply.
Crude prices in New York and London climbed to record highs earlier this summer, but have eased in recent weeks. In trading Wednesday morning, U.S. crude futures were up 61 cents at $45 a barrel on the New York Mercantile Exchange, moved largely by government data showing a decline in inventories. The all-time high reached Aug. 19 was $48.70 a barrel. October Brent crude was up 32 cents at $42.05 in trading on London's International Petroleum Exchange.
A proposal by the cartel's board of governors to increase the price band for its basket of crudes, currently at $22 to $28, will be made at a meeting Dec. 10 in Cairo, Egypt. Prices have long been well above the upper end of the band, which is the cartel's preferred selling range. OPEC's basket price, currently in the $39 a barrel range, is lower than prices in the United States because that market requires a higher grade of product.
Saudi Oil Minister Ali Naimi reiterated that prices for oil remained too high in the wake of voracious demand by China and the United States. He said Saudi Arabia has 1.5 million barrels of spare capacity.
Abdullah bin Hamad al-Attiyah, Qatar's oil minister, said that raising the output target would result in stability.
"We believe that there is more oil in the market, we believe that all this production will give more stability to the market," he said.
The decision doesn't apply to significant oil producers like Russia and Norway, the world's second- and third-biggest producers who are not OPEC members.
Indonesia's Yusgiantoro Purnomo, OPEC's president, urged them to follow OPEC's lead, but Russian Oil Minister Andrey Greus didn't commit.
"We are interested in the stability of prices and more predictability," he said through a translator.
Thorhild Widvey, Norway's oil minister, who will speak to OPEC this week, has said the Nordic country, which produces approximately 2.9 million barrels a day, has no spare capacity.
World demand for oil has been voracious, led in part by China's expanding economy and continued demand in the United States. Oil prices have soared because of the extremely thin margin of spare output capacity worldwide and fears of supply disruptions around the globe.
Analysts say OPEC vastly underestimated the growth of demand this year. Now it seems the group lacks the ability to increase production quickly enough to bring prices down.
On Wednesday, Venezuelan President Hugo Chavez said that his country won't increase its oil production citing "an excess of oil in the market."
Venezuela, a founding OPEC member, produces more than 2.2 million barrels per day, almost a million less than two years ago, when a workers strike paralyzed production. The country's production has been slowly recovering but it is not expected to reach its full pre-strike capacity soon.
Drollas dismissed discussion about changing the band as moot.
"They've never taken it seriously," he said. "Most of countries in OPEC have been selling oil to those who want to buy it for as long as anyone can remember."
The tight market and shortage of spare production capacity means that the cartel "is not operational, really, at the moment," Drollas said. "It's not effective."
OPEC will meet with energy industry leaders, including oil companies and agencies, on Thursday and Friday. 13