OPEC won't produce extra oil despite decision

OPEC’s decision to raise its output ceiling by up to 11% over two months may help soothe a nervous market, but it does not oblige the group to pump a single barrel of additional oil.

The Organisation of Petroleum Exporting Countries agreed in Beirut yesterday to hike its production ceiling by two million barrels a day next month and an additional 500,000 barrels a day in August, if necessary, in a bid to rein in uncomfortably high prices for crude.

OPEC portrayed the two-stage increase as a strong signal of its resolve to ensure ample supplies for a growing world economy.

Representatives of the group approved the decision during four hours of talks at a Beirut hotel.

However, OPEC acknowledges that it is already producing at least 2.3 million barrels above its current ceiling of 23.5 million barrels.

Even if OPEC followed through with both stages of its planned rise in the target, OPEC President Purnomo Yusgiantoro implied that it would simply be legitimising the current overproduction.

Crude prices fell after OPEC's announcement.

Claude Mandil, head of the Paris-based International Energy Agency, said OPEC's decision shows that producing countries recognise that production is important for calming oil markets.

“At the same time, we think the most important (thing) is not quotas, it’s not targets,” he said. “What is really important is real extra barrels.”