OPEC to Consider Saudi Push to Boost Output

The Organization of the Petroleum Exporting Countries, the source of one-third of the world’s oil, probably will approve a plan to boost output and lower near-record prices this week, OPEC officials and energy analysts said Sunday.

And OPEC member Saudi Arabia vowed to keep its crude supplies flowing smoothly to world markets after a deadly militant attack on the eastern petroleum city of Khobar.

Saudi Arabia, the world’s largest oil exporter, had announced May 21 that it would increase its output and proposed that OPEC boost its production target by at least 2 million barrels a day, or 8.5%. In fact, OPEC ministers may decide this week to suspend quotas altogether, according to two officials of the group who asked not to be identified.

International markets had been on edge over the possibility of a terrorist strike in Saudi Arabia, now pumping more than 9 million barrels daily in a bid to cool scorching prices. And Sunday’s pledge of secure supplies from state-run oil giant Saudi Aramco might not go far enough to soothe jittery world markets, where prices again were threatening to pierce the $40-a-barrel mark.

“It raises the fear factor,� said Anthony Nunan, a manager of international petroleum business at Mitsubishi Corp. in Tokyo.

In the U.S., gasoline prices have surged to a record. Companies such as AMR Corp., parent of American Airlines, and Dow Chemical Co. have warned that high oil prices may hurt profits. Washington has lobbied OPEC to pump more crude to lower prices and reduce the threat that rising energy costs may restrain economic growth.

“Whatever happens to the quotas, we’re looking for substantially more oil to come out of the gulf, particularly out of Saudi Arabia,� said Julian Lee, an analyst at the Centre for Global Energy Studies, a London-based consultant founded by former Saudi Oil Minister Ahmed Zaki Yamani. “Once people start to believe that what Saudi Arabia has said is actually going to happen, prices ought to ease a bit.�

The U.S. government’s Energy Information Administration expects increased Saudi oil supply to lower prices.

While planning to increase output, OPEC also is considering raising the price target of $22 to $28 a barrel for the group’s index of crude oils. Iran, Nigeria and Venezuela have said they wanted prices at the top end or above the band.

OPEC discussed the Saudi plan to raise output informally May 22 in Amsterdam during the International Energy Forum, a biennial gathering of consumers and producers. Venezuela, OPEC’s third-largest producer, objected, saying there was enough oil on the market.

Many OPEC countries are pumping at or near maximum capacity, according to Bloomberg and industry estimates. Of the 11 members, only Saudi Arabia is able to boost output by more than a million barrels a day.

Whatever OPEC does, the effect on global markets may be muted by the fact that the gain in oil prices is partly because U.S. refiners are struggling to replenish gasoline inventories, said Kevin Norrish, an energy economist at Barclays Capital in London. “It’s probably not going to do much in the short term because it’s not going to help the U.S. gasoline situation very much.�