An Opec delegate said the organisation agreed on Wednesday to raise its formal production limits by 500,000 barrels per day (bpd) to 28 million bpd.
The increase merely legitimises existing output, leaving a tough test for hard-pressed producers looming ahead of the fourth quarter, when annual world demand peaks.
Ministers also authorised group president Shaikh Ahmad al-Fahd al-Sabah to trigger a further 500,000 bpd increase, perhaps in late July or early August, should prices stay high.
“We have to prepare for the fourth quarter. Demands on Opec will increase to 30.5-31 [million bpd] and we have to prepare ourselves to continue increasing our production just to reach the call on Opec,” he had said ahead of the meeting.
But analysts doubted that the move could calm markets.
Little spare capacity
“Even at the most optimistic estimate the spare capacity of Opec is still too slim to reassure the market,” said William Davie, chief economist at energy consultancy Simmons and Co.
“We have to prepare for the fourth quarter. Demands on Opec will increase to 30.5-31 [million bpd] and we have to prepare ourselves to continue increasing our production just to reach the call on Opec”
Opec president Sheikh Ahmad al-Fahd al-Sabah
Driven by worries over a lack of OPEC spare capacity and refinery bottlenecks, US crude rose 60 cents to $55.60 a barrel.
Prices are up from May’s low of $46.20 back and heading towards early April’s all-time peak of $58.28 a barrel.
Latest estimates are that Opec, including Iraq, which is exempt from quotas, is already touching 30 million bpd, near a 25-year high but short of projected fourth quarter demand.
Opec supplies about 40% of world demand of 84 million bpd.