MIDDLE EAST OPEC acts to lower oil prices

Motorists are still unlikely to see cheaper gasoline anytime soon.
BEIRUT, Lebanon (AP) -- OPEC agreed today to raise its production ceiling by 2 million barrels a day next month in a bid to bring down uncomfortably high prices of crude, several key oil ministers said.
The group also agreed to raise the target by an additional 500,000 barrels a day in August if it sees a need, they said.
However, oil analysts said the decision was unlikely to bring any relief to motorists in the form of cheaper gasoline. The cartel's members are already exceeding their quotas by at least 2.3 million barrels a day, and the increase of 2.5 million barrels a day in the ceiling would essentially legitimize the current overproduction.
Oil prices were higher today after falling sharply Wednesday, but U.S. crude prices were still below Tuesday's record closing peak.
Compromise
The decision by OPEC representatives in Beirut was a compromise between members led by influential Saudi Arabia who were seeking an immediate increase in production of 2.5 million barrels a day to reach a ceiling of 26 million barrels a day and other producers, such as Iran, who preferred to raise the ceiling in at least two stages.
"We have decided to lift the ceiling to 25.5 [million barrels a day] effective July 1 and 26.0 [million barrels a day] effective Aug. 1, and we will meet to review future action on July 21 in Vienna," Saudi Oil Minister Ali Naimi told reporters.
OPEC representatives from Qatar, Nigeria and the United Arab Emirates confirmed the decision before the group met for a closed-door meeting to ratify the increase. A formal announcement was expected later in the day.
Iranian Oil Minister Bijan Namdar Zangeneh, explaining why the group decided to raise the ceiling in two steps, said: "We believe there is not any shortage in the market, and we should be very careful about the coming months."
Although OPEC decided to raise its production ceiling, it stopped short of urging its members to produce additional barrels of oil.
Even so, Nigeria's representative said the higher ceiling would in itself help reduce prices.
"To act as responsible members of the world community, we have to make this strong signal to the market that we are ready to produce to cool the system," said Edmund Maduabebe Daukoru.
Desired effect
Earlier signals from the Organization of Petroleum Exporting Countries, which produces more than a third of the world's crude, that it would raise both the ceiling and its actual output had the desired effect of lowering record-high prices. Oil prices plunged 6 percent Wednesday after the United Arab Emirates and Kuwait pledged to join Saudi Arabia in adding fresh barrels to global supplies.
Prices rebounded somewhat early today as traders questioned OPEC's ability to pump enough oil to calm market fears of terrorists disrupting supplies. In London, contracts of Brent crude for July delivery were trading 24 cents higher at $37.10 a barrel.
July contracts of U.S. light crude were up 42 cents at $40.38 in New York. This was still well short of U.S. crude's record finish Tuesday, which followed a terrorist attack in the Saudi oil hub of Khobar that killed 22 people, mostly foreign oil workers. The attack -- attributed to the Al-Qaida group -- stunned markets, which were already nervous about stretched oil inventories and Middle East tensions.
OPEC officially aims to keep prices within a range of $22 to $28 for its benchmark blend of crudes. OPEC delegates said today the group was not changing its preferred price target. However, prices have exceeded the upper limit since December.
One oil analyst predicted little immediate downward effect on prices.
"Anything less than 2.5 million barrels will be a disappointment to the market. Therefore, it will not cause the price to drop," said Falah Aljibury, an energy consultant based in Alamo, Calif.
However, the need for OPEC to signal that it would add barrels of fresh oil to the market was even more important than a higher production ceiling, Aljibury said.
Consumers won't be paying less for gasoline anytime soon, as other factors such as refinery constraints and accelerating demand during the summer driving season in the United States will have an effect at the pump.