News flash - OPEC agreement reached.
OPEC Sets Hefty Output Hike to 27.5 Mln Bpd
By Richard Mably
JAKARTA (Reuters) - Oil cartel OPEC agreed on Saturday to a hefty rise in its output ceiling to 27.5 million barrels per day (bpd), its first significant increase in supply allocations in four years, delegates said.
The limit agreed by the 11 countries from Africa, Asia, Latin America and the Middle East that account for almost 40 percent of world production will last for the first half of 1998.
The ceiling, set at year-end talks of the Organization of the Petroleum Exporting Countries (OPEC) held in the Indonesian capital Jakarta, is almost 2.5 million bpd above the group's current and widely-ignored 25.033 million bpd.
The pact hammered out in six hours of talks on the fourth day of the conference was in line with demands by OPEC kingpin Saudi Arabia for a sizable rise in the limit that would give the kingdom its highest production in more than 15 years.
The world's largest exporter had suggested a big increase would restore credibility to a dilapidated OPEC system of production quotas and boost the cartel's clout in world markets.
One delegate said OPEC would monitor oil prices in the wake of Saturday's decision and possibly conduct a review of the new output level after three months.
There was no confirmed word of precise details of the accord such as how the new volume would be shared out but if allocations were increased pro-rata then Saudi Arabia would get just under 8.8 million bpd, some 800,000 above its current allocation.
The kingdom, the world's biggest producer and exporter, believes raising its own output to its highest in more than 15 years would recoup ground lost to rampant quota cheating in recent years and give the kingdom even more clout in world markets.
Kuwaiti Oil Minister Isa al-Mazeedi told Reuters that the new ceiling would provide his country with a "just share" of production for which it had been lobbying for many years.
Powerful Gulf Arab producers like Saudi Arabia and Kuwait had been arguing for an increase in the overall ceiling to nearer the real level of supply from the cartel.
Quota busting brought OPEC's actual output in October to more than 27.8 million bpd, according to independent monitors.
Saudi Arabia's opening stance in talks with some other countries had been a big 27.5 million bpd ceiling.
In contrast price hawk Iran and some others believed a rise in the official ceiling should be modest to shore up revenues, arguing a big rise would scare jittery markets into freefall.
There was no immediate reaction from this camp to the new output ceiling.
Delegations had been trying to forge a compromise between divergent wings of the fractious cartel.
But analysts pointed out that thanks to quota busting a rise of around 2.5 million bpd in the ceiling would mean an actual increase of perhaps 500,000 bpd to 600,000 bpd in world supply.
Traders have said that crude flows of that order will probably be absorbed by markets without major price disruption.
Saudi Oil Minister Ali al-Naimi had made plain he wanted a mandate from OPEC to pump more oil and put a halt to erosion of the kingdom's share of a growing world oil market.
The kingdom and neighbors Kuwait and the United Arab Emirates had grown tired of shouldering the burden of supply restraint while other producers reap the benefit of surging world oil demand.
Cash-pinched populous OPEC nations like Venezuela and Nigeria long-ago opted for a policy of maximum output, lifting supplies way beyond quotas. The official limits have been unchanged, with the exception of Iraq, since 1993. REUTERS |
