OPEC to enforce quota increase, cancels July meeting

OPEC, supplier of more than a third of the world's oil, will boost its output quota by 2 percent next month and cancel a meeting scheduled for next Wednesday, as high oil prices threaten to damage growth in the world economy, Bloomberg reported.

The Organization of Petroleum Exporting Countries will enforce a decision made in June to increase output by 500,000 barrels to 26 million a day, said OPEC spokesman Omar Farouk Ibrahim from the group's Vienna headquarters.

Crude oil has risen 10 percent this month in New York to $40.90 a barrel, forcing OPEC to follow through on an output increase that some members had initially questioned. OPEC is producing oil close to the limit as demand grows at a record pace because of an expanding world economy, led by China.

``My feeling has been that with oil over $40 a barrel they would go ahead with the quota increase,'' said Adam Sieminski, Deutsche Bank AG's global oil strategist in London. ``What's the point of the meeting?''

Crude oil was down 24 cents at $40.73 a barrel in New York as of 5:00 p.m. London time. Prices are 29 percent higher than a year ago, partly because demand is rising at a record pace, spurred by economic growth China and the U.S.

Market `Unchanged'

Crude reached a record $42.45 a barrel on June 2. As well as rising demand, prices have risen because of the sabotage of Iraqi pipelines and gun attacks in Saudi Arabia, which raised concern of potential disruptions.

OPEC made its decisions after ministers discussed the market yesterday and concluded the outlook was ``essentially unchanged'' compared with when they last met on June 3, OPEC President Purnomo Yusgiantoro said in a statement.

``In these circumstances, the organization has decided that there is, therefore, no call for the conference to meet,'' he said. ``The organization will nevertheless continue to closely monitor market developments.''

Purnomo, who is also Indonesia's energy minister, will hold a news conference next Thursday in Vienna, the statement said.

Libya had said it wanted the meeting, which would have been OPEC's fourth this year, to take place. OPEC has met more often in recent years to discuss policy as part of efforts to bolster oil prices. Another meeting is scheduled for Sept. 15 in Vienna.

OPEC oil ministers decided June 3 in Beirut to raise the group's output limit for all members excluding Iraq by 2 million barrels a day to 25.5 million barrels a day as of July 1 and by a further 500,000 barrels from Aug. 1.

Some ministers said the second increase would be reviewed at the July 21 meeting. After prices fell following the June 3 announcement, nations including Iran and Nigeria questioned whether the August quota boost should take place.

Record Demand

OPEC is already producing more oil than the new quota calls for. In June, the 10 members with quotas pumped 27.5 million barrels a day, 730,000 more than in May, a Bloomberg survey found. Iraq isn't part of the group's quota system.

The bulk of the extra OPEC oil is coming from Saudi Arabia, OPEC's top producer, which intends to pump 9.1 million barrels a day this month, in line with its June plan and up by between 500,000 and 600,000 barrels a day from May, the Saudi Oil Ministry has said.

World oil demand is rising by a record 2.49 million barrels a day, or 3.2 percent, this year, according to the International Energy Agency, a Paris-based adviser to 26 industrialized countries. (*)