With the price of oil stuck above $40 a barrel, OPEC agreed Thursday to raise its daily production target by 500,000 barrels per day, or 2 percent, in an effort to keep crude prices from lurching even higher.
The Organization of Petroleum Exporting Countries is making the increase automatically, by mutual agreement, and canceled a formal meeting it had planned for its members on July 21 at its headquarters in Vienna, Austria, said an official for the group, speaking from Vienna on condition of anonymity. The increase will take effect August 1.
While oil-exporting countries are happy to maximize profits, OPEC and its de facto leader Saudi Arabia worry that global economic growth and the long-term demand for crude could suffer if prices spike to punishing heights.
OPEC, which pumps more than a third of the world's oil, agreed last month to make a two-step increase in its output ceiling, to try to calm concerns about disruptions in oil supplies from Iraq and a possible terror attack on export facilities for crude in Saudi Arabia.
The group decided first to raise its ceiling by 2 million barrels on July 1, and agreed to follow up with a second increase of 500,000 barrels on August 1 if market conditions warranted.
"The market conditions these days actually call for the implementation of the second part of the agreement. There is a consensus that the extra 500,000 barrels should be implemented Aug. 1," the OPEC official said.
A meeting of OPEC representatives to discuss the matter in person would be "a waste of time," the official added.
OPEC's production target is now 25.5 million barrels a day.
Few analysts expect the increase in OPEC's target to do much to reduce prices. Most of the group's members are already pumping flat out to satisfy strong demand, and oil markets have factored the expected increase into current prices.
Jan Stuart, head of energy research at New York brokerage FIMAT USA, argued that the hike would matter little because OPEC's actual production far exceeds its official target.
The International Energy Agency, a watchdog for major oil-importing nations, estimates that OPEC produced an average of 26.9 million barrels a day in June — or 3.4 million barrels more than its target at the time.
"It's almost academic. They're already producing way over quota," agreed John Waterlow of Wood Mackenzie Consultants in Edinburgh, Scotland.
Contracts of U.S. light crude for August delivery were down 20 cents at $40.77 a barrel in morning trading on the New York Mercantile Exchange.