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OPEC agrees oil output rise in nod to consumers
By Reuters

VIENNA, Sept 11 (Reuters) - Saudi Arabia persuaded OPEC to
raise oil output by 500,000 barrels per day on Tuesday in a
gesture to consumer nations worried by the economic impact of
$77 oil and rapidly diminishing fuel stocks.


After seven hours of talks, OPEC officials announced the
hard-won deal, effective Nov. 1. Before the meeting Libya,
Algeria and Venezuela were inclined to resist the proposal put
forward by Saudi Arabia and its Gulf Arab neighbours.


"We think the market is a little bit tight so we are
responding positively. We are also taking into the consideration
as OPEC the concern of the consumers," acting Kuwaiti Oil
Minister Mohammad al-Olaim told reporters.


U.S. crude oil was down 29 cents at $77.20 after the deal
but still within sight of its record high of $78.77 a barrel.


OPEC's move followed months of calls for more oil from top
consumer the United States and the International Energy Agency
that represents the interests of 26 industrialised nations.


"It's the responsible thing for OPEC to do given the market
needs more oil with the higher seasonal requirements ahead,"
said Gary Ross, CEO at Pira Energy Consultancy.


The increase comes on top of current OPEC supplies.


It reverses most of the 1.7 million bpd of cuts agreed by
the oil exporter group since Oct 2006 because the 10 members
subject to output limits were already pumping almost one million
bpd above their nominal ceiling of 25.8 million.


OPEC, shipping some 30 million barrels per day into the 86
million bpd global market, has been trying to make sense of
conflicting economic data leading into peak winter demand.


Industrialised consumer nations are forecasting their crude
oil stocks will fall to the bottom of the five-year average
range by January unless OPEC pumps more crude oil, and fast.


But uncertainty over the U.S. economy -- last month
employers cut jobs for the first time in four years -- has cast
doubt over oil demand growth in the world's top consumer.


The views of the Gulf Arab states, particularly the world's
biggest exporter Saudi Arabia, are key to OPEC policy decisions.
They straddle more than half of OPEC's proven oil reserves and
have almost all the organization's spare production capacity.





GESTURE


An increase of 500,000 bpd should placate consumer nations
without flooding the market and causing a price collapse.


Before the meeting some ministers expressed concern credit
turmoil stemming from U.S. subprime loans might hit the real
economy.


"The ministers are worried about financial markets and also
the backwardation in U.S. crude oil futures so it is a very
sensitive situation," OPEC Secretary-General A**ullah al-Badri
said.


U.S. crude oil for October delivery costs more than later
months, a "backwardated" price structure that may point to a
tight market and encourage refiners to draw oil from their
stocks.


Demand forecasts for the final quarter of the year show an
increase of up to 2.0 million bpd. At the top end, the
International Energy Agency sees consumption rising to 88.1
million bpd. OPEC puts the figure at 87.08 million bpd.


U.S. Secretary of Energy Sam Bodman told reporters in
Florida on Monday he had encouraged OPEC to increase supplies.


"They heard. They were courteous," he said.


Simon Wardell, energy analyst at Global Insight, said even
with extra OPEC oil global crude stocks could fall by 100
million to 150 million barrels by the end of the year.


"That will push global inventories down to their lowest
levels since 2004, with a risk that they could fall further if
there is a cold winter," he said.