Opec agrees to raise oil output

Rapid economic growth in Asia is driving oil demand

Opec oil ministers have agreed to lift production ceilings by an extra 500,000 barrels of oil a day to help cool prices from recent record levels.

Opec also held out the prospect of a further boost to output, saying it would consider another rise of the same magnitude between April and June.

Prices fell on the news but later rose to new highs of above $56 a barrel on a surprise dip in US petrol stock levels.

Opec's move is unusual; spring weather in big economies usually brings cuts.

But Opec member states are already pumping above the new daily output ceiling of 27.5 million barrels, so the move may have only a limited impact.

"They are raising the ceiling because it's already produced," the Agence France Presse news agency quoted Libya's energy secretary Fathi Hamed ben Shatwan as saying.

"We're all already over quota," said Algerian oil minister Chakib Khelil.

Prices ease

US light sweet crude dipped 25 cents to $54.80 on the Opec announcement, while in London Brent crude fell 30 cents to $53.55.

In afternoon trade, however, prices edged up as US government data showed petrol and heating stocks had fallen.

It will not drive the price down but stabilise it and keep it from zooming into the stratosphere Professor Anthony Sabino, St John's University, New York

Opec said it would keep a close eye on oil prices over the coming weeks, pledging to take "appropriate and prompt action" where necessary, ahead of an extraordinary meeting in Vienna on June 7.

Saudi Arabia had been pressing for an immediate increase in supply but other Opec members were thought to be less keen - Algeria and Libya directly opposed the move.

Iran, Kuwait and Nigeria had suggested that any increase be put off until May to allow the seasonal dip in the second quarter of the year to feed through.

Market stability

Oil analysts and traders were doubtful about the impact of the new output levels as Opec members are already thought to be producing about two million barrels a day more than official production limits.

"It will not drive the price down but stabilise it and keep it from zooming into the stratosphere," said Professor Anthony Sabino of St. Johns University's business school in New York.

Saudi oil minister Ali al-Naimi told the al-Hayat newspaper that oil prices should be between $40 and $50 a barrel.

"Supply and demand are balanced now on the oil market and stockpiles are good," he said.

"But when we looked at demand in the last quarter we found that there will be a big jump between the third and last quarter by around 2.7 million barrels a day."