Opec ministers agree to raise oil production

Opec members yesterday agreed to boost the cartel's oil production target by 7 per cent to cover a shortfall in crude exports from Venezuela and ease the threat to global growth from high oil prices.

The increase of 1.5 million barrels per day was larger than expected and will take effect on 1 February, the Organisation of Petroleum Exporting Countries announced, after an emergency meeting at its headquarters in Vienna.

The increase, which will be divided pro rata among Opec countries, aims to calm fears of a supply crunch caused by an ongoing strike in Venezuela. The strike was launched a month ago by political opponents seeking to oust President Hugo Chavez. This has slashed the country's exports by about 2 million bpd – meaning even the new Opec production limit will not entirely compensate for the stoppage in Venezuela.

Gary Ross, chief executive of the US consultancy Pira Energy, said: "Lack of spare capacity [among many Opec members] means actual additional oil will probably be less than half that promised on paper. Opec production will still be less than had there been no Venezuelan disruption."

Venezuela is normally Opec's third-largest producer and a major supplier to the US.

The cartel's president, Abdullah bin Hamad al-Attiyah, said: "Opec is trying to send a very strong message that it will do its utmost to stabilise demand and supply. Now we will wait for the market to react."

The move to try to cap the high oil price is also helpful politically to the US in its threatened war against Iraq, which has been the other major reason for concerns about supply shortfalls. Analysts said an assault on Iraq, cutting another 2 million bpd, could still leave Opec floundering if Venezuelan oil is not restored.

Opec's new production ceiling, which will be reviewed again in March, is 24.5 million bpd. Member countries pump about a third of the world's crude supplies, which total 79 million bpd.

The outcome of yesterday's meeting appeared to contradict Saudi Arabian oil minister Ali al-Naimi's comment earlier in the day that the ceiling should remain at 23 million bpd. Saudi Arabia is Opec's most influential member, and it has the bulk of the cartel's spare production capacity.

The oil price has already come off sharply over the past few days in anticipation of an Opec boost to production.

Mr al-Attiyah confirmed that Opec's price target remains $22 (£14) to $28 per barrel. Even after the recent falls, Brent crude traded in London ended on Friday at $29.67 a barrel. In the US, oil prices recently rose above $33 a barrel for the first time in two years.