VIENNA – OPEC ministers on Wednesday agreed to increase their ceiling for oil production to help bring down stubbornly high prices, in a decision that traders and analysts dismissed as symbolic because the cartel already is pumping more than its new target.
In a meeting at its Vienna headquarters, the Organization of the Petroleum Exporting Countries set a ceiling of 27 million barrels a day effective in November, an increase of 1 million barrels.
The decision will not affect how many barrels of oil the cartel’s member countries actually produce. OPEC’s 11 members are pumping about 30 million barrels a day in an effort to keep prices down, officials said.
OPEC’s president, Purnomo Yusgiantoro, said he hoped the increasing the ceiling would have a psychological impact on the market, helping calm worries about supply. “What we would like to see is the prices down,” Yusgiantoro, minister of energy and mineral resources for Indonesia, said at a news conference after the meeting.
The oil ministers want lower prices because of concern that the cost of crude could ultimately curtail world economies, lead to less oil consumption and hurt OPEC members.
The price of oil fell on the New York Mercantile Exchange, but analysts said the OPEC decision was not the reason. They cited profit-taking and the expectation of a short-term disruption to the oil sector due to Hurricane Ivan. The price for U.S. benchmark crude oil for October delivery fell 81 cents Wednesday to $43.58 a barrel.
With OPEC’s member countries producing near their capacity, traders are concerned that any significant disruption to production – in Iraq or other oil-producing countries – could be problematic.
OPEC, which is responsible for more than one-third of the world’s oil production, is pumping oil at its highest level in 25 years. OPEC officials said they have the ability to pump as much as 1.5 million barrels more a day, and that some member countries, including Saudi Arabia, will add more capacity soon.
Analysts said the cartel’s action Wednesday means little because its members are producing so close to their limit.
“They’re trying to get headlines like the old lion that lost its claws,” said Philip Flynn, vice president of Alaron Trading Corp. in Chicago. “They’ve lost the ability to bring down prices. They don’t have claws anymore.”
Raad Alkadiri, an analyst with PFC Energy in Washington, D.C., said the market is not being driven by factors under the cartel’s control. “It’s not in their hands,” he said.
Analyst William Edwards, head of Edwards Energy Consultants in Katy, Texas, said some OPEC ministers incorrectly believe that by looking like they exert control, they can calm world markets.
“They like to think they have more control than they actually exercise,” Edwards said.
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