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 The BBC's Greg Wood"World oil stocks are low and Opec's increased output can't replenish them"  real 28k  US Energy Secretary Bill Richardson"The increase will help to stabilise markets"  real 28k |
Even Iran, which initially voiced strong opposition, has now joined the bandwagon and announced that it will begin pumping more oil from 1 April.
The move has been welcomed by US President Bill Clinton, who has urged petrol stations to pass the savings onto motorists.
The US government has faced strong consumer and political pressure to reduce rising oil prices ahead of the election.
However, oil prices are likely to stay high, despite the Opec agreement. Analysts say the production boost will at best stabilise prices at the current level of about $25 a barrel.
New levels: barrels per day |
Saudi Arabia: 8.023m
Venezuela: 2.845m
UAE: 2.157m
Nigeria: 2.033m
Kuwait: 1.980m
Libya: 1.323m
Indonesia: 1.280m
Algeria: 0.788m
Qatar: 0.640m
Iran: t.b.a.
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After Opec first announced its production cuts in spring 1999, the price of oil tripled from $10 to $30 a barrel.
At their two-day meeting in the Austrian capital Vienna, Opec ministers agreed to raise production by 6.3%, or a total of 1.45 million barrels a day, the level from which cuts were made a year ago.
The agreement was in response to criticism about the escalating worldwide price of fuel.
These increases will help sustain worldwide economic growth and provide greater balance between oil supply and
demand.  |
Bill Clinton
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On Wednesday morning, though, he reversed course and told Iranian radio that "Iran definitely plans to increase production from 1 April".
Mr Zangeneh said the amount would depend "on the national interest and what the market dictates".
US pressure
According to observers, Iran had been reluctant to join the production boost, as it did not want to be seen giving in to pressure from the United States.
The US government has been pushing hard for a large increase in output.
The eleventh member of the cartel is Iraq, which has been outside the quota systems since a United Nations embargo imposed after the Gulf War.
An Opec spokesman said the agreement will be reviewed in three months' time at a specially convened meeting.
Opec Secretary General Rilwanu Lukman said the June meeting in Vienna could modify the new quotas, depending on market conditions.
Split over size of increase
Oil ministers failed to reach agreement Monday, suspending talks only a few hours after they had begun.
Several Opec members had said they were prepared to pump more oil but were divided over how big the increase should be.
Iran favoured an increase of about 1.2 million barrels, but Opec's biggest producer, Saudi Arabia, and Kuwait were said to favour an increase of up to 1.7 million barrels, which would ease crude prices back to the target of $25 a barrel.
The 1.7 million barrels target would have been reached on Tuesday, if Iran had agreed to restore production to pre-March 1999 levels.
Political pressure
Although many countries' economies are now less susceptible to oil price rises than they were during the oil crisis of the 1970s, there has been growing consumer and political concern about the inflationary effects of oil's continuing high price.
The cost of petrol in the US is a political issue as well as economic one.
From less than a dollar a gallon a year ago, petrol now costs $1.55 a gallon on average across the US, and more than $2 in parts of California.
US politicians fear that if it hits the psychological level of $2 a gallon in an election year, there will be a voter backlash.
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