OIL OPEC decision won't cut gas price, analysts say

Raising the output ceiling merely legitimizes current overproduction.
BEIRUT, Lebanon (AP) -- OPEC's decision to raise its output ceiling by up to 11 percent over two months may help soothe a nervous market, but it doesn't oblige the group to pump a single barrel of additional oil.
The Organization of Petroleum Exporting Countries agreed Thursday to increase its production ceiling by 2 million barrels a day next month and an additional 500,000 barrels a day in August, if necessary, in a bid to rein in uncomfortably high prices for crude.
OPEC portrayed the two-stage increase as a strong signal of its resolve to ensure ample supplies for a growing world economy. Representatives of the group approved the decision during four hours of talks at a Beirut hotel.
However, OPEC acknowledges that it's already producing at least 2.3 million barrels above its current ceiling of 23.5 million barrels. Even if OPEC followed through with both stages of its planned increase in the target, OPEC President Purnomo Yusgiantoro implied that it would simply be legitimizing the current overproduction.
Crude prices fell after OPEC's announcement. But industry analysts said the decision was unlikely to make gasoline any cheaper in the United States, where refinery constraints and rising demand during the peak summer driving season have pushed prices higher at the pump.
"Gasoline prices are still going to stay high," said Jamal Qureshi, of the Washington-based consultancy PFC Energy.
In his opening address at the meeting, Purnomo of Indonesia called on OPEC's members to do "as much as they can to help stabilize the oil market," but he refrained from an explicit request for them to provide additional barrels above what they're already producing.
Compromise
Saudi Arabia, OPEC's most influential member, pushed to lift the ceiling by 2.5 million barrels all at once, and markets were expecting OPEC to approve the widely publicized Saudi plan. But OPEC member Iran insisted on a more gradual rise, to keep prices from falling too fast, and the Saudis compromised on the conditional two-step increase.
Claude Mandil, head of the Paris-based International Energy Agency, said OPEC's decision shows that producing countries recognize that production is important for calming oil markets. The IEA is the energy watchdog for oil importing nations.
"At the same time, we think the most important [thing] is not quotas, it's not targets," he said. "What is really important is real extra barrels."
Under pressure from the United States and other major importers, Saudi Arabia has already boosted its actual output by 600,000 barrels a day, independently of OPEC. Saudi Arabia has the world's largest proven oil reserves and is the only OPEC member with capacity to pump significant amounts of fresh oil.