A meeting of the Organization of Petroleum Exporting Countries (OPEC) has resulted in an increase of the cartel’s official oil production ceiling by one million barrels per day (bpd).
'It's a gesture of goodwill to the consumers that we want lower prices,' Algerian Oil Minister Chakib Khelil said.
Kuwaiti Oil Minister Sheik Ahmad Fahad al-Ahmad al-Sabah, who was elected as the group’s incoming president, said the group agreed at its Wednesday meeting in Vienna to raise output by nearly four per cent, adding that the change would take effect November 1.
'We will give a signal to the market that we are working hard for the stability of the market,' he said.
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, although member nations are already producing 27.4 million bpd.
Abdullah bin Hamad al-Attiyah, Qatar's oil minister, said 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.
OPEC also plans to monitor market movements to gauge the need for future oil adjustments.
Not everyone agrees The OPEC decision doesn't apply to major oil producers outside of the alliance, 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 agree.
Thorhild Widvey, Norway's oil minister has said his country, which produces about 2.9 million barrels a day, has no spare capacity.
On Wednesday, Venezuelan President Hugo Chavez said 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 a day. The country's production has been slowly recovering from a workers strike two years ago which hindered production. However, it is not expected to reach its full pre-strike capacity soon.
High demand Saudi Oil Minister Ali Naimi reiterated that prices for oil remained too high in the wake of a seemingly insatiable demand from China’s growing economy and the United States. These needs, coupled with political unrest and weather uncertainties in oil-producing regions, initially drove the market higher. Prices have also soared because of the extremely thin margin of spare output capacity worldwide.
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.
OPEC will convene for its next regular meeting in Iran on 16 March.
By the numbers A proposal by the cartel's board of governors to increase the target price band for its basket of crudes, currently at $22 to $28, will be made at an extraordinary meeting December 10 in Cairo.
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. Some members feel the band should be adjusted upwards to better reflect the market reality, which has seen oil skirt around $40 to $45.
Crude oil prices in New York and London climbed to record highs earlier this summer, but have eased in recent weeks.
U.S. crude futures were up 61 cents at $45 a barrel on Wednesday’s New York Mercantile Exchange. 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.
