Opec agrees to raise output for ending oil-price rally

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March 16: The Organisation of Petroleum Exporting Countries agreed to increase production for the fourth time in less than a year, seeking to restrain price increases that threaten the world economy.

Opec will raise quotas by 5,00,000 barrels a day, or 1.9%, as of April 1, then hold talks on a similar increase to start May 1, Opec President Sheikh Ahmad Fahd al-Sabah told reporters on Wednesday in Isfahan, Iran, where the group is meeting. Because members are already supplying more than the planned, additional barrels may not come until May, he said.

A three-year surge in oil prices led to record profit last year at oil companies including BP Plc, while contributing to the bankruptcy of US Airways Group Inc. and restraining growth in the world economy. Crude oil in New York lost 32 cents to $54.73 a barrel, within $1 of its record high, as traders and analysts expected little relief from higher energy costs.

"Prices will come down but not dramatically,'' said Gal Luft, executive director of the Institute for the Analysis of Global Security, a Washington-based company that advises clients on energy policy. "They will stay within the range of the high $40s and low $50s,'' he added.

Opec countries already are pumping about 7,00,000 barrels a day more than promised in a failed bid to cut prices. More than half of its 11 members are operating at or close to full capacity, according to Bloomberg estimates.

Rising oil costs and a stronger euro led French Finance Minister Thierry Breton today to cut France's 2005 growth forecast to as little as 2% this year, compared with the previous estimate of 2.5%. US Treasury Secretary John Snow last week said oil prices are creating a "headwind'' for the economy.

Higher oil costs led the 30-member Organisation for Economic Cooperation and Development to lower its projection for growth this year to 2.9%, 0.4% percentage point lower than an earlier estimate.

A decision by Opec to increase production during the second quarter, when demand declines, signals a shift in strategy, with the group allowing inventories to increase for use later in the year, creating a buffer against potential shortages.