Opec output bid to cool oil prices

OPEC today looked poised to agree to a production increase for the first time in six months in a desperate attempt to cool world oil prices.

As the oil cartel met in Iran, speculation was growing that more members were willing to back Saudi Arabia's bid for an increase of 500,000 barrels a day. This would take the official output ceiling across Opec, excluding Iraq, to 27.5m barrels a day.

Saudi oil minister Ali al-Naimi said: "Current oil price levels of $55 are high and we want prices to be between $40 and $50 a barrel."

US light crude eased 40 cents to $54.65 ahead of the meeting as markets waited for official confirmation of the move. Some ministers have called for Opec to delay voting for an increase until May, fearing demand will drop sharply in the second quarter of the year.

Analysts said it was doubtful the production rise would dampen world oil prices, given ever-growing demand from China. World crude consumption is expected to soar in the fourth quarter and there are fears about how producers will cope.

Rob Laughlin, an analyst at Man Financial, said: "The longs in the market are in this for the ride. If the price does dip, I doubt it would be anything substantial."

He added: "The increase is a political gesture by the Saudis. They have been trying to canvas support but the smaller members are at full capacity and want to get the best price they can."

US crude moved to within two cents of its all-time high of $55.67 earlier this month.