With Opec already overshooting quotas by about 700,000 barrels a day, any such move would mostly have a psychological effect by signalling that the organisation is formally ready to pump more in an effort to regulate prices.

 

Prices have shot up by nearly 20% in the past five weeks to around $54 a barrel in New York - a little more than a dollar shy of all-time records - putting pressure on the 11-nation organisation to cool the markets.

 

Ministers had signalled the group was likely to keep its output quotas steady and merely agree to leak out more oil when it meets on Wednesday on production policy for the spring.

 

Terms of debate

 

But Saudi Arabian Oil Minister Ali Naimi changed the terms of the debate on Monday by calling for a formal increase in quotas, and Opec's president, Kuwaiti Oil Minister Shaikh Ahmad Fahd al-Sabah signalled consensus was building around that idea.

Oil prices have steadily breached
the $50-mark since January

 

"If the prices continue at the present rate, then we will increase our production," al-Sabah said on arrival at the airport in Isfahan. "If necessary, we will increase by 500,000."

 

The group's other option on Wednesday is to leave its output ceiling unchanged, al- Sabah said.

 

Alluding to the group's present overproduction above the formal output ceiling of 27 million barrels a day Iranian Oil Minister Bijan Namdar Zangeneh, said neither proposal would put any additional oil on the market.  

 

Legitimise

The increase to the ceiling proposed by Saudi Arabia is probably just intended to legitimise some of that overproduction, Zangeneh said. 

"If the prices continue at the present rate, then we will increase our production"

Shaikh Ahmad Fahd al-Sabah,
Kuwaiti oil minister

 

The group would be unwise to raise output aggressively now in what is traditionally the weakest season of the year for oil demand, he said.

 

"Both proposals mean we should keep the existing level of production within OPEC," the Iranian oil minister said.

 

The Saudi proposal resulted in a drop of about 60 cents on the New York Mercantile Exchange for benchmark crude, with a barrel dipping below US$54. Of Opec's 11 member nations, Iraq is exempt from the quota system as it rebuilds its infrastructure in the aftermath of the 2003 war.