VIENNA, Austria – OPEC on Wednesday lifted oil supply quotas by one million barrels a day, four percent, in a renewed bid to force down stubbornly high world crude prices.
The pact is designed to underscore the Organization of the Petroleum Exporting Countries' (search) intent to exert downward pressure on prices that last month topped $49 a barrel for U.S. crude, a record.
Official output allocations for 10 member countries go up to 27 million barrels a day from November 1. But the new deal is expected to make little difference to actual supply flows.
OPEC is already pumping some 28 million barrels daily and leading producer Saudi Arabia has made a commitment to customers to keep deliveries high.
"This is a signal to the market not a change in total output. It will have a psychological effect on prices," said Iranian Oil Minister Bijan Zanganeh.
"Practically speaking quotas are all but suspended at the moment so where they are set is not important," said Alirio Parra, a former OPEC president.
OPEC worries that inflated energy costs will hamper world economic growth and dent the fastest growing global fuel demand in a generation, fired by China's economic boom.
Oil prices have remained high despite OPEC ramping up supplies this summer to a 25-year high. U.S. crude on Wednesday traded off 4 cents at $44.35 a barrel as a hurricane battered U.S. Gulf oil operations.
"OPEC had to appear responsible," said Gary Ross, chief executive of New York's PIRA Energy (search) consultancy.
"It is clear the Saudis intend to keep their foot on the pedal until they achieve their objective."
Saudi Arabia rejected suggestions that it has lost control of oil prices that some say are inflated by as much as $10 a barrel over levels warranted by supply-demand fundamentals.
"OPEC has not lost control of the market, it is market orientated," said Saudi Oil Minister Ali al-Naimi (search). "We are not going to be pushing oil that is not wanted. If there is no shortage in the market then OPEC has not lost control."
Although producers are delivering near flat out, most ministers did not want to legitimize all they are pumping in their formal supply quotas. Delegates said keeping official allocations lower than actual supply would allow OPEC more flexibility to cut back quickly, without readjusting quotas, should prices suddenly fall.
High prices have encouraged producers to accelerate plans to bring new oilfields onstream, helping rebuild some spare capacity into a severely stretched world supply system.
Two new fields in Saudi Arabia will be pumping 800,000 bpd by the end of September, Saudi's Naimi said. Kuwait and Algeria also are adding extra volumes before the end of the year of near 300,000 bpd combined, their oil ministers said.
Deutsche Bank analyst Adam Seminski said of the OPEC agreement: "This is a signal that they want prices to go down but what we really need is more spare capacity and less sour crude for prices to go down."
OPEC output includes a large proportion of high-sulfur, heavy crude but world markets are short of transport fuels refined more easily from low-sulfur, light grades.
OPEC put off a decision on raising its official price target.
A delegate said ministers scheduled another conference for December 6 in Cairo to review output policy and probably settle a new price target. Some want a $5 increase in a range centered on $30 a barrel.