Opec looking to boost output after price rise

KUWAIT CITY - Opec may boost its crude output quota by 500,000 barrels a day next month and add another half-a-million barrels in the third quarter in a bid to stop record oil prices from slowing economic growth, the group's president says.

Sheikh Ahmad Fahd al-Sabah said yesterday: "Prices should remain within a reasonable range to prevent a slowdown in economic growth. Because prices are at a record, we expect to resume discussions this week to add 500,000 barrels a day starting in May."

Opec, the supplier of almost 40 per cent of the world's crude, is pumping close to its limit to bring down crude prices that reached an all-time high of US$57.70 a barrel ($81.15) in New York at the weekend. High oil prices contributed to slowing job growth and faster inflation in the US in March, signs that the economy may be slowing.

"Oil prices could reach US$60 if the group doesn't calm the market and increase supply," said Sabah, who is also Kuwait's Oil Minister. Market fears of supply disruptions were driving up the oil price.

Opec states with quotas, all except Iraq, are now producing close to 28 million barrels a day, which is 500,000 barrels above the present output quota.

The group has spare capacity of 2 million barrels a day and this will rise to 3 million barrels by the end of the year as members boost their production capabilities.

Crude prices of US$55 a barrel had slowed economic growth in countries such as the US and China, the world's largest oil consumers, said William Ramsay, deputy director of the International Energy Agency. "Just because these countries continue to grow, doesn't mean oil price increases haven't affected them."

Sabah said Opec might raise its oil-output quota by 500,000 barrels a day in the third quarter and make more increases in the fourth quarter.

The 11-member group agreed on March 16 to boost its official output quota by 500,000 barrels a day to 27.5 million barrels and pledged to add half-a-million barrels a day more as early as May, if prices rose and demand warranted more supply.

A Goldman Sachs report said prices could touch US$105 a barrel in the next several years as the market went through a "super spike" period because of increasing demand.

It said rising prices were needed to reduce energy consumption.

- BLOOMBERG