OPEC will boost output target 6%

Bruce Stanley

Thursday, Dec. 12, 2002 | 9:50 a.m.

VIENNA, Austria -- OPEC representatives have agreed to raise their formal target for oil production by 6 percent, or 1.3 million barrels a day, and to urge member countries to comply more strictly with their new quotas, the group's president said today.

Delegates from the Organization of Petroleum Exporting Countries are fearful of oversupplying the market ahead of a seasonal, post-winter dip in demand.

By boosting the quotas of all its member countries, the group aims to legitimize some of its current overproduction.

OPEC President Rilwanu Lukman told reporters OPEC was insisting that producing countries rein in excess production above the authorized target level.

The new target of 23 million barrels a day will take effect Jan. 1, he said, speaking after the delegates met for informal talks.

The delegates were to ratify the decision at a formal session later in the day at the cartel's headquarters in Vienna, Austria.

Analysts estimate that OPEC is producing about 2.5 million barrels a day above its existing target. This gap between OPEC's target and its actual output widened during the autumn, leading many observers to question OPEC's credibility.

OPEC supplies about a third of the world's crude.

Several delegates expressed concern earlier that quota-busting by the cartel's members creates a risk that crude prices might collapse when demand for home heating oil declines with the warmer springtime weather in major importing nations of the Northern Hemisphere.

Saudi Arabia, OPEC's most powerful member, urged the group to curb excess production by up to 2.0 million barrels a day. At the same time, the Saudis wanted OPEC to raise its output target by up to 1.5 million barrels a day.

Due to the level of overproduction, the Saudis argued that a quota increase would occur on paper only and add no fresh barrels to the market.

OPEC hopes this two-pronged approach will help restore some of the reputation for reliability that it lost in recent months because it wasn't complying with its own quotas.

The cartel needed to do something to salvage its credibility in the market, said Falah Aljibury, an energy consultant based in Alamo, Calif.

By raising its output target to legitimize some excess production while also requiring better compliance with its quotas, the cartel sends a message that it is in control of its own affairs.