OPEC’s Decision to Pump more Leads to Lower Oil Prices
The price of oil dipped slightly after Opec said it would pump an extra 500,000 barrels a day if the price did not fall significantly before the end of July, reported BBC.online.
Opec's decision was in response to worldwide concern over the escalating price of a barrel of crude, which has shot up from $10 to $30 in just 18 months.
The rise was caused by Opec (the Organization of Petroleum Exporting Countries) exercising its power as a cartel to restrict world supply to keep the price up.
However, members have been in dispute over the level of production since Saudi Arabia said it wanted to pump more oil to bring prices down to nearer Opec's target of $25 a barrel, added BC.
If Opec's "basket" of crude remains priced above $28 a barrel between now and 28 July, the cartel will lift output, according to the report.
On Monday the price of a barrel of the international benchmark, Brent crude, was 63 cents, or 2%, lower at $28.60 by 1700 GMT.
At about $30, the price of oil has been sparking concerns over inflation around the world by pushing up the costs of producing goods.
The BBC said the dispute among Opec members over whether to increase oil production appears to be settled, at least for the time being, with the cartel's president, the Venezuelan oil minister, Ali Rodriguez, telling member countries to prepare to pump an extra 500,000 barrels a day.
Two weeks ago, the world's biggest producer, Saudi Arabia, proposed the production boost, but at the time there was considerable opposition within Opec.
The report added that there was also anger that the Saudis were apparently prepared to act alone and produce the full extra 500,000 barrels a day if necessary.
Now, it seems, the additional output will be shared out pro-rata among the Opec countries, giving Riyadh an extra 162,000 and bringing the Saudis' total to 8.415 million barrels a day.
The Kuwaiti oil minister, Sheikh Saud Nasser al-Sabah, was quoted as saying the Opec countries had overcome their differences: "That is what we all agreed upon and we signed on this."
Early reaction on the markets saw an immediate drop in the price of a barrel of benchmark Brent crude, which slipped back about 50 cents to $28.65, BBC said – Albawaba.com
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