OPEC Agrees to Raise Its Production Target

The Organization of the Petroleum Exporting Countries agreed on Wednesday to increase its production target for the first time in three years, a move that appeared to signal that Saudi Arabia and Iran had put aside their recent differences on oil policy, at least temporarily.

The move should have little lasting effect on oil prices because the production target of 30 million barrels is closely in line with the current output by the organization, and targets were not set for individual countries. But the agreement had symbolic value coming six months after a meeting of OPEC ministers ended in disarray when they failed to reach a consensus to lift production.

“We have an agreement to maintain the market in balance,” said Rafael Ramirez, the energy minister of Venezuela, which had aligned with Iran at the last meeting to oppose a move advocated by Saudi Arabia to raise production targets to help the ailing global economy.

In recent years, OPEC’s 12 members have increasingly followed their own production and export policies. Saudi Arabia increased its production over the last 10 months when the outbreak of revolution in Libya halted 1.3 million barrels a day of exports, and a few other gulf producers with spare capacity followed suit. With Libya production quickly ramping back up over the last two months, the Saudis have signaled that they will ease production in the coming months regardless of the results of the OPEC meeting in Vienna.

Saudi Arabia, which accounts for about a third of OPEC’s total production, has been working hard behind the scenes to restore the organization’s credibility after the June meeting ended with no agreement.

Iranian representatives appeared to be in no mood to challenge the Saudis despite rising tensions between the two countries in recent months over the Saudi military intervention in Bahrain and allegations of an Iranian-backed plan to assassinate the Saudi ambassador to the United States.

Iran’s petroleum minister, Rostam Ghasemi, gave a conciliatory speech before OPEC ministers in which he appeared to agree with the Saudi position that OPEC should accommodate world markets with ample supplies to keep oil prices from rising too high.

“The big challenge facing the oil market at the present time is coming with the tremendous uncertainty affecting world economic growth,” Mr. Ghasemi said. “This uncertainty about economic growth translates into uncertainty about oil demand.”

The new quota replaces a previous target of 24.5 million barrels, which was set three years ago when the global economy and oil prices slumped badly but has been largely ignored by members who could produce more than their allotted quotas. But the total production target will include Iraq and Libya, two countries expected to expand production in coming months.

Iran, which held the rotating presidency of the OPEC this year, proposed that Iraq hold the seat next year. The ministers agreed, signaling that Iraq would again be a central player in the organization for the first time since the United States-led invasion and toppling of Saddam Hussein in 2003.

Benchmark oil prices fell by more than $3 a barrel on Wednesday, mostly because of concerns about the European economy and the declining value of the euro. Oil prices have been fluctuating in recent months, with most benchmarks ranging from $90 to $125 a barrel during the year. Most benchmark prices are now hovering around $100 a barrel, although the United States benchmark is several dollars lower, closing on Wednesday down $5.19, or 5.2 percent, to $94.95 a barrel.

Prices rose sharply in the early months of the year when turmoil spread across North Africa and the Middle East and then eased because of rising concerns about the slowing economies in Europe and the United States. Prices have firmed in recent weeks again as tensions grew between Iran and Western powers over Iran’s nuclear program and the possibility that Europe would sharply curtail Iranian oil imports. Many oil analysts predict a similar price range for 2012, with a continuing tug between political instability in oil-producing countries and economic weakness among large consuming countries.

Petroleum demand has been especially soft in the United States in recent weeks. The Energy Department reported that demand last week of 18.4 million barrels a day was down by 1.8 million barrels compared with demand in the week a year earlier. The four-week annual demand was down 5.6 percent from last year because of a decline in consumption of gasoline, heating oil and other fuels.

Gasoline prices in the United States are dropping. The national average price for a gallon of regular gasoline on Wednesday was $3.26, down 15 cents from the average price a month ago. Still, the national average for a gallon of regular is 28 cents higher than it was a year ago.

Article source: http://feeds.nytimes.com/click.phdo?i=10020555778813f84d8867f09e88c6ec