Opec yesterday acted to put a break on the spiralling oil price, agreeing to a modest increase in production for the first time in more than a year.
The cartel moved amid mounting fears over the impact of surging prices on a global economy that has been buffeted by the ongoing crisis in the world's credit market, sparked by the US sub-prime mortgage debacle that has seen hundreds of thousands of low-income borrowers defaulting on loans, spreading contagion throughout the world's financial system.
Abdullah bin Hamad al-Attiya, the Qatari oil minister, said that from November, members of the cartel will pump an extra 500,000 barrels a day over and above the 25.8 million barrel-a-day level set last year.
Despite speculation of a production increase during trading yesterday, the oil price continued its relentless rise, moving in sight of record highs although the increase in production eased the pressure later on in the day.
Opinion was initially divided on the need for an increase among members of the cartel, who met in Vienna, but amid US pressure Saudi Arabia eventually overcame opposition from Venezuela, Algeria and Iran who argued that the world is already adequately supplied with oil.
It had remained silent in the run-up to the meeting as price hawks made clear their resistance to production increases.
Chakib Khelil, the Algerian oil minister, said: "We don't support an increase as far as Algeria is concerned. Right now we don't see sufficient evidence to justify increasing quotas."
Saudi Arabia, a key US ally, is the world's largest oil producer and by far the most important member of the cartel, whose members are already pumping more than their official quotas theoretically allow.
On Monday, Sam Bodman, the US secretary of energy, added his voice to calls for supply increases to ease the pressure caused by the soaring oil price and phoned ministers from Opec countries to request that they produce more oil.
Those in favour of an increase fear that a faltering global economy, led by the US, reeling from the impact of the sub-prime crisis, could dent demand if a slowdown becomes pronounced.
In a statement yesterday Opec said it had acted because "the high demand winter season necessitates keeping the market adequately supplied".
"To this end the conference decided to increase the volume of credit supplied to the market by Opec member countries by 500,000 barrells per day, effective from 1 November 2007."
Today a report on the US, the world's largest oil consumer, is expected to show that its stock piles of crude oil fell for the ninth week in 10. Demand usually hits a high in the fourth quarter of the year as refiners produce fuel for heating the northern hemisphere during the winter months.
Last year Opec cut output by 6 per cent to ensure prices stayed above the $60 a barrel level. Since then prices have risen by nearly a quarter and moved within 50 cents of a record $78.77 reached in August during trading yesterday.
Analysts have voiced fears that they could break the $80 level.Reuse content