Prices ease as oil flow rises

Output quotas will grow by two million barrels a day from 1 July and a further 500,000 from 1 August.

The price of a barrel of US-traded oil dropped by 68 cents to $US39.28 as news of the agreement emerged. In London, Brent crude fell 46 cents to $US36.40 a barrel.

The group of mainly Middle Eastern producers made the decision at talks in Beirut against a backdrop of record prices and fears that al-Qaeda could target Saudi Arabian oil facilities.

US Treasury Secretary John Snow welcomed the production increase, calling it “encouraging”.

An Opec statement says the move is to “ensure adequate supply and give a clear signal of Opec’s commitment to market stability”.

However, it is not the Opec announcement that has been credited with lowering prices on the floor of the New York Mercantile Exchange but new figures released in the United States showing increased stockpiles of crude oil and gasoline.

US inventories of gasoline are above 200 million barrels, easing concerns about shortages going in the American summer driving season.

Oil analysts remain doubtful that Opec’s agreement to lift output can have a deep and lasting effect on prices.

Some experts believe Opec states are already at maximum production, with existing ceilings on production quotas being breached, suggesting the impact of any Opec decision to raise output targets could be limited.

An attack by militants on an oil workers’ compound in the Saudi city of Khobar, which left 22 people dead, pushed prices to record highs of $US42.45 a barrel.

Opec member countries say security fears and the action of market speculators are to blame for soaring prices rather than short supplies.


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