Opec fails to stem price rises

Very few Opec members have spare capacity

Opec ministers face fresh pressure to increase their oil output, after their decision to raise production quotas failed to bring down the price of oil.

The price of oil is continuing to rise on Friday, with the price of benchmark Brent crude for August delivery up by 26 cents in early London trading to $30.41 a barrel.

In New York, its benchmark light sweet crude for August delivery had closed at $32.19 overnight.

We will do whatever it takes to bring [prices] down to a level we consider more reasonable

Rilwanu Lukman, Opec

The price development appears to confirm the warnings by many analysts that Opec has not raised oil production enough.

But Opec secretary general Rilwanu Lukman told BBC Radio 4 that the situation would improve once non-Opec members, such as Mexico and Norway, increased production as well.

Mr Lukman said other factors were boosting the cost of oil, including taxation in developed countries.

Opec controls 40% of the world's oil production.

He has previously said that Opec would take further action to raise output if oil prices remained too high.

"We will do whatever it takes to bring it down to a level we consider more reasonable," he said, adding that the target price was about $25.

Consumer pressure

Members of Opec, made up of the world's major oil producers, have come under pressure to do something to stop the recent sharp rises in the cost of a barrel.

Consumers across the world, such as in the UK and the US, have been hit by rapid rises in the price of petrol as a direct result of the oil price rises in recent months.

The spiralling cost of the fuel has also threatened to hit industry and has led to growing political pressure, especially in the US ahead of the Presidential election.

In the UK consumers have seen the price of a litre of petrol rise from 75p in January to 86p and higher in June as the shortage of oil has been exacerbated by the weakness of the pound against the dollar.

Opec's fear is that if consumers find oil too expensive, they will switch to other fuels.

Done deal

The deal agreed on Wednesday is for output to be increased by 708,000 barrels to 25.4 million barrels per day (bpd) from 1 July.

But there were mixed views as to whether the 3% rise - agreed at an unusually brief 90-minute meeting - would be enough to bring down the price of oil.

Analysts said that an increase of 700,000 bpd would only add an estimated 200,000 fresh bpd to the market.

This is because OPEC's 11 members are already exceeding their quotas by a total of roughly 500,000 barrels a day.

Non-OPEC producers - such as Mexico and Norway - are expected to add a further 200,000 to 300,000 bpd of new oil to the market.

After the first production boost three months ago, world oil prices fell briefly, but soon began to creep up again.

Opec countries currently produce 24.7 million barrels of oil daily.

Opec raised production by 7% or 1.7 million barrels per day in March under heavy pressure from the US as oil prices hit $34 a barrel there.

Opec members are Saudi Arabia, Iran, the United Arab Emirates, Kuwait, Qatar, Nigeria, Libya, Algeria, Venezuela and Indonesia.