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OPEC Agrees to Increase Oil Output - 2004-09-15


The Organization of the Petroleum Exporting Countries has agreed to increase output by one million barrels a day in a move to lower oil prices. However, analysts say prices are unlikely to fall.

OPEC agreed to a four percent increase in official production quotas. The decision lifts quotas by one million barrels a day to 27 million.

OPEC is concerned that oil prices reached record levels this year, going above $40 a barrel.

The cartel says the market is well supplied with oil and prices have been pushed up by speculation and unexpected demand from China and India.

Johannes Benigni, analyst for PVM Oil Associates, says many refineries in the United States and Europe will be closed for several weeks next year.

"The problem is in the period January to April next year we will have significant maintenance work that means we may expect that prices again will be driven by fear of gasoline shortage."

OPEC is pumping at its highest level in more than 20 years in an effort to lower prices and has little spare capacity.

Mr. Benigni says non-OPEC oil producing countries could bring more oil onto the market, but this will take time.

"We see more Angolan oil, Mexican, Brazilian, Russian and a lot of additional volumes will come on stream. But all this takes time so we see that [in] the second half of 2005, but especially 2006, we may have an easing of the situation."

Crude oil futures are trading at more than $40 a barrel in New York and London.

OPEC is scheduled to review prices again in December.

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