OPEC marginally increases oil output

The oil production rise agreed by ministers from the Organisation of Petroleum Exporting Countries (OPEC) was marginally higher than analysts expected.

But their decision to raise output by 800,000 barrels a day from October 1st fell short of the 1.2 million rise understood to have been proposed by Saudi Arabia, which dominates the organisation.

Even so, analysts last week predicted a daily output rise of only 500,000 barrels and a 700,000-barrel rise was predicted early yesterday. The OPEC ministers agreed to meet again on November 12th to discuss the impact of the decision.

Yesterday's four-hour meeting in Vienna came as pressure mounted on western states to act decisively in the face of consumer protests and fears of an economic slowdown.

Yet EU ministers, who met in Versailles, ruled out the possibility of general fuel tax concessions to offset the increase in fuel.

The price per barrel now stands at about $32, in excess of three times the rate charged when prices hit lows in 1999.

Germany's transport minister, Mr Reinhard Klimmt, said the latest production rise was "still not enough".

But his French counterpart, Mr Laurent Fabius, was slightly more upbeat. "The increase decided by OPEC is a step in the right direction . . . It is an extremely complex market. I hope it will have an effect on the market, but we will see," he said.

The output rise next month will lift production by just over three per cent to 26.2 million barrels a day for OPEC's 10 members.

"They [OPEC] clearly made this announcement to show that they are making a gesture towards the markets," said Mr Pierre Terzian, an oil analyst at Petrostrategies.

But while experts predicted a slight fall in prices with eventual stabilisation at about $30 per barrel, many said an output increase of one million barrels a day was necessary to really take the heat off the markets.

The US energy secretary, Mr Bill Richardson, was unclear on the likely impact of the increase. "Whether such an increase will stabilise the market remains to be seen," he said in a statement.

OPEC blames the current high price of crude on record low stocks of oil, at a time when global economic growth is feeding demand and the northern hemisphere is approaching the cold winter months.

The organisation has already increased production twice this year. Yet the moves had little effect on prices.

OPEC has been under pressure to lift output, especially from the US where hauliers, airlines and everyday commuters incurred heavy losses as the prices rise. Protests in France and Britain and threatened action by Irish hauliers have brought the matter to top the agenda nearer home.

"We would like to acknowledge the constructive role that Saudi Arabia is playing with respect to the oil markets," said Mr Richardson.

The chief of staff at the White House, Mr John Podesta, also recognised Saudi Arabia's role. "I think this is a substantial increase led by Saudi Arabia.

"We're going to digest that, see what the market does, and see what it does really to stocks."