PETROLEUM PRODUCTION OPEC OKs adding output; price rise still threatens

Observers estimate there's only a small cushion of extra oil.
LONDON (AP) -- OPEC hopes to put a lid on stubbornly high crude prices by adding 500,000 barrels a day to its targeted output, but high worldwide demand for oil and a dearth of spare production capacity could spoil its plans.
With most members of the cartel already pumping all they can, analysts worry that a disruption in crude shipments from a major producer could raise prices to damaging new heights.
Indeed, some observers estimate that the world has little more than 1 million barrels in spare capacity remaining -- a small cushion if shipments stop suddenly from places like Iraq.
"I think these are dangerous times. The danger is that a supply disruption at this stage would create unprecedented problems and unprecedented prices," said Peter Gignoux, a London-based oil adviser for GDP Associates.
Hovering price
Already the price of crude has been hovering around an uncomfortable $40 a barrel for more than two months. On Thursday, the Organization of Petroleum Exporting Countries decided to raise its daily production target by 2 percent, or 500,000 barrels, in an effort to keep prices from spiraling higher still. The cartel pumps more than a third of the world's oil.
OPEC made the increase automatic by mutual agreement, and canceled a formal meeting it had planned for its members July 21 at its headquarters in Vienna, Austria, said Purnomo Yusgiantoro, the group's president. The increase will take effect Aug. 1.
Although oil-exporting countries are happy to maximize profits, OPEC and its de facto leader Saudi Arabia worry that global economic growth and the long-term demand for crude could suffer if prices soar higher.
Light crude
Contracts of U.S. light crude for August delivery fell 20 cents to settle at $40.77 a barrel on the New York Mercantile Exchange.
But few analysts expect lower prices to last, noting production is already above quota and oil markets had already factored the output increase into prices.