OPEC Ups Production Ceiling

Looking to ease concerns about record oil prices, OPEC agreed to increase its production ceiling by 1.4 million barrels/day to 27.2 million. The move is not as dramatic as the number initially indicates; OPEC was already producing an estimated 1 million barrels/day over the limit, but it is the first time the number had been upped in more than a year. Kuwait's Oil Minister Mohammed Abdullah al-Aleem said the decision was intended to "look after the concern of consumers" and "support the stability of the market." It will take pressure off the world economy, which is currently being dragged down by the stumbling U.S. housing industry. The decision was a welcomed surprise, as most analysts and traders did not see OPEC increasing their production, and shows the cartel's recognition that high energy prices during the colder months in the U.S., Europe, and Asia could seriously damage the world economy. However during November, United Arab of Emirates is planning maintenance on its three largest oil fields, subtracting 810,000 barrels/day. The work should start in early November and last two to three weeks. The work is needed to expand capacity, but could give oil prices support despite the increase in the production ceiling. Front-month crude finished Tuesday $0.74 higher to $78.23.

Sources: Reuters, Bloomberg, Wall Street Journal
Commentary: Gas Prices Up, Crude Down, Refinery Problems Cited • Are Oil Prices Increasing at a Rapid Rate? • OPEC Members at Odds Over Output Hike
ETFs: USO, OIL

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