P.M. BRIEFING : OPEC Expected to Raise Quota Next Month to Bring Prices Back Down

OPEC is expected to raise its production quota in June to help return bloated prices to the cartel’s $18-a-barrel target level, Iraq’s oil minister said today.

The Middle East Economic Survey quoted Issam Abdul-Rahim Chalabi as saying that an increase in the output ceiling should end overproduction by some of the organization’s 13 members.

Chalabi said the increase is expected to be formalized at a June meeting of OPEC ministers and to take effect in the second half of the year. Industry observers expect an increased output of about 1.5 million barrels a day.

Last November, the Organization of Petroleum Exporting Countries set a production quota of 18.5 million barrels a day in an effort to raise world oil prices, which had fallen to $10 to $12 a barrel. At the time, the cartel was producing in excess of 22 million barrels, far more than the market could absorb.

Since then, oil prices have nearly doubled, although several OPEC members are producing above their quotas. OPEC does not want to see prices too high lest they encourage non-OPEC producers to increase production.