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OPEC Considers Doubling Previous Plan for Quota Increase
By SIMON ROMERO

VIENNA - On the eve of an OPEC meeting here, members said they were considering doubling a proposed increase in oil production quotas, as a spike in crude prices this week underscored growing concern about the recent volatility in energy markets.
 

Whatever OPEC decides, oil prices are expected to remain high.

Crude oil for July delivery fell 62 cents, to $55 a barrel on Tuesday, after a 4 percent surge on Monday. Several OPEC representatives have grown worried in recent weeks over their inability to push oil prices below the threshold of $50 a barrel. Oil is 40 percent more expensive than it was a year ago.

Edmond Daukoru, Nigeria's presidential adviser on petroleum, told reporters here on Tuesday that OPEC was considering increasing the group's production quotas by one million barrels a day- or twice what was discussed over the weekend before delegates began arriving in Vienna. OPEC's production quotas stand at 27.5 million barrels a day. The 11-member group produces about 4 out of every 10 barrels of oil in the world each day.

Although large oil-importing economies in the Northern Hemisphere have been surprisingly resilient to the higher fuel costs, the drag on economic activity because of costlier oil is causing their patience with OPEC to wear thin.

Samuel W. Bodman, the United States energy secretary, said this month that his department was in constant communication with OPEC members to emphasize the need to increase the oil supply.

"Obviously we would encourage, have encouraged, and will encourage increases in production to the extent that it's possible," Mr. Bodman told reporters in Washington.

Yet as OPEC reacts to such sentiment in the United States and Europe, the organization appears confused on how to bring stability to oil markets. To maintain the flow of money into its members' treasuries, OPEC needs to keep oil prices high, but not so high as to encourage governments to provide incentives for energy sources other than oil.

Sheikh Ahmad al-Fahd al-Sabah of Kuwait, the president of OPEC, confirmed that a proposal to raise the production ceiling by one million barrels a day was under discussion, but other delegates expressed concern about going beyond the increase of 500,000 barrels a day that Saudi Arabia, OPEC's most powerful member, had already endorsed.

"If we agree on the 500,000, then we don't need to do anything else," said Hammouda el-Aswad, a Libyan OPEC representative, according to Bloomberg News.

Whatever OPEC decides, oil prices are expected to remain high. The refining capacity for the type of additional oil that might come into the market, which is rich in sulfur, remains scarce around the world. And analysts warn that it may take months for some OPEC members to secure access to the drilling rigs necessary to expand production.
 

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