/www.bloomberg.com/ By Sean Evers, Alex Lawler, Stephen Voss and Matthias Wabl
Vienna,(Bloomberg) -- OPEC agreed to raise output quotas by 6.5 percent in a bid to replace Venezuelan supplies and lower oil prices from close to two-year highs.
The group's target starting next month will increase by 1.5 million to 24.5 million barrels a day, said Ali al-Naimi, Saudi Arabia's oil minister, after a special meeting called in Vienna. The quota is its highest since March 2001.
Oil prices now at about $30 a barrel are expected by ministers to drop $2 or more after the decision. Disruptions to Venezuela's oil exports by a general strike and a possible war with Iraq boosted oil prices 44 percent in London last year, the second-largest gain of the past two decades.
``Prices may fall a little bit, but I still think overall that the major issue is Iraq,'' said Nauman Barakat, head of the oil-trading desk at Fimat International Banque SA in London. ``Once the market has digested this news, prices are going to start to track higher again.''
OPEC last week scheduled its second meeting in a month, after crude oil prices in New York surged above $33 a barrel.
``We are trying to send a very strong message to our customers that we trying our best to stabilize the oil markets,'' said OPEC President Abdullah bin Hamad al-Attiyah, also the oil minister for Qatar. ``Hopefully, prices will fall back into the band.'' He was referring to OPEC's target range of $22 to $28 a barrel.
Already Pumping
Al-Naimi, the Saudi minister, earlier said members already are pumping more oil outside of their existing quota accord to replace lost Venezuelan output.
``There is no shortage. We never allowed the shortage to take place,'' the Saudi minister said. ``There is a significant shortage from Venezuela, but there is no shortage in the international market.''
The kingdom within two weeks can increase production to more than 10 million barrels a day, from an estimated 8 million barrels last month, the minister said. It would take 90 days to sustain supplies at 10.5 million, and the nation could go beyond that ``rather quickly,'' he said.
Ministers from Iraq, Libya, Kuwait and Iran didn't show for the meeting.
The Venezuelan government is struggling to maintain basic services as the six-week strike slows oil exports and production. Venezuelan oil production plunged by 2.3 million barrels a day in December to an average 700,000 barrels a day, according to Bloomberg estimates.
``We are increasing production,'' said Ali Rodriguez, head of Venezuela's state-owned oil company, earlier today. ``Our objective is to reach a level in order to satisfy all our commitments to our customers.'' Venezuela intends to reach 2.5 million barrels a day of output in February, he said.
Because of the strikes, U.S. crude oil inventories fell to 275.5 million barrels as of Jan. 3, according to the American Petroleum Institute. The 273 million in October was the fewest since 1976.
Target Range
OPEC members met because of an informal agreement to consider increasing output when its benchmark index stays above the target of $22 to $28 a barrel for 20 consecutive days. The benchmark price was $29.82 Friday, the 18th trading day above the range, meaning the accord may be triggered Jan. 14. The accord is still in place if prices don't fall, al-Attiyah said.
In London, the February Brent crude-oil futures contract Friday rose 3 cents to $29.67 a barrel on the International Petroleum Exchange. Prices reached $31.02 last month.
In Vienna on Dec. 12, OPEC set a two-pronged strategy to curb overproduction and avoid a price decline later this year. To bring members closer to the quota, the group raised the daily output target to 23 million barrels while pledging to cut supplies by as much as 1.7 million barrels a day.
The 11-nation group holds almost 80 percent of oil reserves and pumps only a third of global supply, restraining output to bolster prices. Only Iraq isn't bound by OPEC's production agreements because its trade is under United Nations supervision.