OPEC unable to lower oil price

[CVX]

People, it is time to do something, and fast. Am I wrong for being worried? Sue me.

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Leading OPEC producer Saudi Arabia on Tuesday underlined the cartel's inability to ease fuel costs, saying oil supplies would not rise despite plans to increase official output limits.

Saudi Oil Minister Ali al-Naimi said Riyadh had informed its customers of export allocations for July that mean keeping output steady at 9.5 million barrels a day.

Meeting on Wednesday, the Organization of the Petroleum Exporting Countries is considering lifting production quotas by 500,000-barrels a day, 2 percent, to 28 million bpd.

But OPEC President Sheikh Ahmad al-Fahd al-Sabah conceded the move is little more than a political gesture to consumer countries worried oil prices are impeding world economic growth. "Just symbolic," was Sheikh Ahmad's assessment of the planned policy change.

U.S. crude eased 32 cents to $55.30 a barrel by 1600 GMT, after a $2 leap on Monday. Average prices for the year so far are near $51 a barrel, up $20 from the 2003 average.

Some traders say OPEC looks powerless to prevent prices challenging April's record above $58 a barrel as a resilient global economy, led by China and the United States, soaks up more oil in the second half of the year. "The bulls are going to look at OPEC and say they're almost maxed out on capacity when demand in the fourth quarter is for another million barrels a day on top of what they're producing now," said Nauman Barakat at brokers Refco in New York. "We may be heading towards $60."

OPEC output for 10 members with supply allocations is already close to the proposed new 28-million-bpd limit, so very little, if any, extra output is expected.

Naimi said Saudi, the only producer with spare capacity, already was meeting world crude demand. For the time being, he said, there was no call for more. Others in OPEC are at full stretch. "Everybody in OPEC is at full capacity, maybe Saudi Arabia has something left but it is heavy oil, so in practical

physical terms we have nothing," said Libyan Energy Minister Fathi Bin Shatwan.