LONDON -- OPEC members have reached agreement to increase oil
production output, and the price of crude took an immediate dive.
The cartel issued a statement on Monday that it was prepared to raise
output by the end of the month. The statement quoted OPEC president,
Venezuelan Oil Minister Ali Rodriguez, who dismissed plans for an emergency
conference in Vienna on Tuesday.
Instead, Rodriguez said any decision to raise production would be left
until late July or early August. "In the event of prices remaining at the
current levels, they should be prepared to take the necessary steps to raise
output," the statement said.
The OPEC president called for a pricing mechanism that would call
for an automatic increase in oil production of 500,000 barrels per day, according to MIddle East Newsline. The
output increase would be dependent on the price of a basket of OPEC crudes
exceeding $28 for 20 working days.
Oil industry sources said OPEC's 10 members agreed to the formula. This
means that by July 28, OPEC will launch a production increase.
On July 3, Saudi Arabia said it would increase production by 500,000
barrels per day unless prices eased.
The oil increase is far less than the one million extra barrels of oil
demanded by the United States. Oil analysts have predicted a shortage in
Europe during the winter.
Still, the first reaction to the OPEC statement was a drop in oil
prices. In London, the price of benchmark Brent crude for September delivery
decreased by 59 cents to $28.64 dollars a barrel.
