OPEC agrees to raise oil output

OPEC8217;s output increase, the third this year, comes amid an international outcry over petrol prices and concerns that high energy costs could trigger inflation and dent world economic growth. Ministers agreed the extra volumes during a three-hour meeting at the hotel suite of cartel president Ali Rodriguez of Venezuela. They said they will ratify the deal at a formal session at OPEC headquarters at 1400 GMT.

Oil prices fell from 10-year highs at the end of last week as it became clear OPEC would supplement two previous hikes assembled this year that partly reinstated tight curbs dating back to 1998.

But Brent blend at 32.75 a barrel and US light crude at 33.60 still value oil far in excess of the 20-25 a barrel that the European Union and the United States have said would represent a fair price. Fuel protests across Europe, where high taxes make petrol and diesel among the world8217;s dearest, have highlighted a growing impatience among importers.

SAUDI LEAKS: Expectations are that the Kingdom will add its share of new oil to a large dose of leakage that already has it pumping well in excess of its official quota.

Saudi8217;s Naimi said that Riyadh already had pumped another 600,000 barrels a day since July. But he added that he would not risk hard-won cooperation in the group by pumping on behalf of those without spare capacity. The comments confirmed that Saudi Arabia, OPEC8217;s leading producer, is making a unilateral effort to ease the highest prices for crude oil since 1990.

The Minister did not specify exact output by Saudi Arabia, the world8217;s largest oil producer. Under OPEC8217;s last agreement in June, Riyadh was awarded an output quota of 8.253 million BPD. An extra 600,000 BPD on top of that quota would represent a 7 per cent increase and put Saudi output at 8.85 million.

Enjoying a prosperity not seen in years, many producers fear a downward price spiral if low inventories in consumer nations are replenished too quickly. Industry observers say petroleum stocks in the West, particularly of heating oil, are so low that unless the northern hemisphere has a very mild winter crude prices may stay firm for some months to come.

But OPEC states, which pump most internationally traded petroleum, say tight supplies of refined products like heating oil are keeping prices up rather than any shortage of crude.

quot;There is absolutely no problem putting additional crude oil into the market,quot; Naimi said. quot;But we must be extremely careful that efficiency is required by people running refineries. Eventually people will realise that the industry is living with less inventories. Eventually a lot of this price is hype,quot; he added.

Meanwhile, world oil consumption is expected to rise to 115 million barrels a day BPD in 2020, up 50 per cent from 2000, although consumption in the European Union should grow far more slowly, an EU document said.

OPEC oil-producing nations would cover nearly half of world oil demand in 2020 by producing about 55 million BPD, compared with 32 million BPD in 2000, EU Energy Commissioner Loyola de Palacio said in a note to the EU8217;s executive Commission.

quot;That availability of OPEC production is justified by a production-cost level which would continue to be extremely advantageous, even in a low price scenario,quot; the document said.

Volume of non-OPEC production would be closely linked toprice movements since reserves will continue to be plentiful, it said.

Gross domestic oil consumption in the 15-nation EU shouldgrow four to five Times less quickly than world demand, rising to 13.2 million bpd in 2020 from 12 million bpd in 2000.

It said 93 percent of that increase would be accounted forby transport.

The EU plus Norway would produce roughly 6.0 million bpd in2020, compared to 7.0 million bpd in 2000.

Total demand for energy from all sources is expected to riseto 15 billion tonnes oil equivalent toe in 2020 from 9.3 billion toe in 2000, the document said.