The OPEC oil cartel announced Monday a new 500,000 barrel-a-day output increase, the fourth hike this year to ease soaring prices, but markets were largely unimpressed.
The production increase was made under a price-band mechanism aimed at keeping crude prices within a range of $22-28, as opposed to the $30-35 of recent months.The high oil price has fueled warnings of a global economic slowdown.
The price of Brench crude for December delivery stood at $31.02 in London by mid-afternoon Friday, up seven cents on the day. "The announcement has had little impact because there was already a late sell-off on Friday, said Tony Machacek, an analyst for brokerage Prudential BACHE in London.
OPEC's president Ali Rodriguez, Venezuela's oil minister, had written to fellow ministers of the Organisation of Petroleum Exporting Countries asking them to implement the output increase from Tuesday, said an OPEC statement.
"I am writing to your excellency to ask you to take the necessary steps to raise your esteemed country's output" from October 31, he said, noting that it was triggered by the price-band mechanism.
OPEC has already boosted production three times over the past 12 months in an attempt to rein in prices that have spiked to 10-year highs above $35 a barrel on a thirsty market.
OPEC oil ministers are due to meet in Vienna on November 12, and had indicated that they would wait until then to decide on any new increase.
But analysts had increasingly speculated that a production increase would be agreed earlier, under the price-band mechanism, because of persistently high prices.
Lawrence Eagles of the GNI brokerage said the meeting in two weeks' time would not now be expected to produce anything more. "I think it's unlikely," he said.
The organization is divided between countries like heavyweight Saudi Arabia, which have spare capacity and are keen to increase production, and others that fear that too big an increase could spark a dramatic slump in prices.
The price-band mechanism, agreed in March, allows for an automatic 500,000 barrels per day increase if the price of OPEC's reference basket strays outside a range of $22-28 for 20 consecutive days.
The 20th day was reached last Friday, but for OPEC purposes Monday was the first day it would in theory be triggered.
Analysts noted that the actual increase would be much smaller, due to overproduction already in the system. Machacek estimated the actual increase at about 100,000 barrels per day, "which is pretty insignificant." Eagles agreed.
"It was already discounted in the markets. The amount is very limited," he said, estimating the amount of new oil at 200,000 barrels.
The statement from OPEC's Vienna headquarters noted media reports that "some member countries indicate that steps are already being taken to implement the increase from midnight today."
Algerian Energy and Mines Minister Chakib Khellil immediately announced that Algiers was increasing its oil production by 36,000 barrels per day from Monday.
Soaring crude prices, at levels not seen since the 1991 Gulf War, have sparked warnings from Western countries and institutions of an impact on global economic growth.
They also triggered protests by consumers in Europe in September, starting in France and spreading to Britain and other countries.
OPEC has repeatedly rejected sole blame for high fuel prices, lambasting high taxes levied by consumer governments on oil products, which make up more than 70 percent of the final price in some countries.—AFP.
©--Agenece France Presse.
© 2000 Mena Report (www.menareport.com)