OPEC will raise official output by 3 percent, oil prices rise on belief it is too little

VIENNA, Austria - OPEC members agreed Wednesday to boost official crude oil production by 3 percent, a move unlikely to provide motorists with relief from record-high gasoline prices in the United States.

After an unusually brief 90-minute meeting Wednesday evening in Vienna, a spokesman for the Organization of Petroleum Exporting Countries said 10 OPEC members voted to increase the group's daily quota by 708,000 barrels. It was the second time in three months that the cartel voted to step up production to stabilize prices.

Members will begin pumping more oil beginning July 1, OPEC Secretary General Rilwanu Lukman told reporters.

Oil prices rose on world markets, and analysts said they expected that the increased production limits would have little substantial impact on U.S. gasoline prices through the summer months.

The main U.S. crude oil, West Texas Intermediate, rose 72 cents Wednesday on the New York Mercantile Exchange, where contracts for August delivery closed at $31.37 a barrel. On Tuesday, when the July contract expired, the price for oil for short-term delivery closed at a 3-month high of $33.05 a barrel.

On the International Petroleum Exchange in London, the August contract for Brent crude from the North Sea rose 31 cents Wednesday to close at $29.33 a barrel.

Prices had been even higher in New York and London before OPEC's decision was announced, when there was concern that even smaller production increases would be adopted. OPEC took the action to keep prices from rising so high that it would substantially reduce oil consumption.

''Extremely high prices could have a negative effect on demand, so we are worried about that,'' Lukman said.

Lukman acknowledged that some of OPEC's members are exceeding their current output quotas and said the new agreement would actually put about 600,000 fresh barrels of OPEC crude on world markets each day. Analysts were skeptical.

Leo Drollas, chief economist for the London-based Center for Global Energy Studies, said the net increase would be closer to 400,000 barrels, including additional cheating on quotas.

Several analysts said that OPEC's increase in output would probably cap current high prices for crude but would do little to ease prices for gasoline in the United States.

''Gas will stay as tight as ever, and it will only come down when the driving season ends,'' Drollas said.

Roger Diwan, an analyst at The Petroleum Finance Company, a consultancy based in Washington, said that an increase of 700,000 barrels a day would ''remove some of the sting'' to oil importing nations, causing U.S. oil prices, for example, to drop to between $27 and $28 per barrel. As a rough rule of thumb, each $1 drop in the price of a 42-gallon barrel of oil is equivalent to a 2 cent decline in a gallon of gas.

The ministers met at a time when pressure is building in the United States for relief from sharply rising gasoline prices. The national average price of regular unleaded gas was $1.681 this week, up 5 cents from the previous week, according to the U.S. Department of Energy, representing a fourth straight week of record highs.

''I think the U.S. gas prices are going to continue to go up this summer,'' said Falah Aljibury, an industry consultant based in Alamo, Calif.

American refineries already are producing almost all the gasoline they can, and U.S. gas inventories are at their lowest levels in several years, he said. By the time ships containing fresh Middle Eastern crude reach U.S. ports, the summer driving season will be almost over.

Hopes for even greater OPEC production were tempered by the group's limited ability to pump more oil. Only Saudi Arabia, Kuwait and the United Arab Emirates have enough spare capacity to pump large amounts of new oil, Drollas said. Under pressure from the United States, nine OPEC members agreed in March to raise output in a successful effort to trim crude prices, which had almost tripled over the previous year.

The March agreement excluded Iraq, which never was part of the production cuts last year that sent prices surging. Iran participated unofficially in that increase although it refused to sign the formal agreement out of anger at what it saw as heavy-handed U.S. intervention.

This time, Lukman said, ''I do not think there was any pressure form anybody.''

Iran will participate in the latest agreement, although Iraq will not.

OPEC's official quota, not including Iraq, is now 24.7 million barrels a day. It will increase in July to 25.4 million barrels.

OPEC pumps about 35 percent of the world's oil.

In line with the group's higher production, non-OPEC producers such as Mexico will probably boost their own output by about 200,000 daily barrels, Lukman said.