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Opec agrees to raise oil output Opec agrees to raise oil output
(about 1 hour later)
Opec members have agreed to increase oil production by 500,000 barrels a day to meet concerns about rising demand.Opec members have agreed to increase oil production by 500,000 barrels a day to meet concerns about rising demand.
The 12-nation oil producers' cartel agreed to support a proposal from key member Saudi Arabia to raise daily production from 1 November. The 12-nation oil producers' cartel agreed to support a proposal from influential member Saudi Arabia to raise daily production from 1 November.
Oil prices have been touching record highs on fears of a growing imbalance between supply and demand.Oil prices have been touching record highs on fears of a growing imbalance between supply and demand.
US light crude was trading at $77.51 a barrel on Tuesday afternoon, near record highs of $78.77 hit in August. US light crude rose above $78 a barrel, near its $78.77 all-time high, after Opec's decision but then eased.
Changing tack Timing questioned
Recent upward pressure on prices has been caused by a series of attacks in Mexico as well as concerns over the impact of hurricanes on oil infrastructure in the Gulf of Mexico. In afternoon trading, it was up a cent at $77.50 while Brent crude rose 23 cents to $75.71 in London.
Until Tuesday, Opec ministers had insisted there would be no increase in supplies.Until Tuesday, Opec ministers had insisted there would be no increase in supplies.
This was despite warnings from the International Energy Agency, which represents the world's top 26 oil consuming nations, that additional supplies would be needed to meet demand. The risk of a global economic slowdown means that Opec might be releasing more barrels onto the market just when they are not needed Addison Armstrong, TFS Energy Futures
Economists have also suggested that an increase in Opec supplies, and the likely result that prices will fall, would help ease recent US economic and global stock market jitters. This was despite warnings from the International Energy Agency, which represents the world's top 26 oil consuming nations, that additional supplies were needed to meet demand.
Reports suggested the Saudis were concerned that persistently high prices would hurt demand for oil in the short term..
Economists have suggested that an increase in Opec supplies, and the likely result that prices will fall, would help ease recent US economic and global stock market jitters.
But there are also concerns that the market could be oversupplied should any weakening of the US economy reduce demand for oil.
"The risk of a global economic slowdown means that Opec might be releasing more barrels onto the market just when they are not needed," said Addison Armstrong, an analyst with TFS Energy Futures.
Over the past year, Opec - which supplies more than a third of the world's oil - has cut deliveries by about 6%.Over the past year, Opec - which supplies more than a third of the world's oil - has cut deliveries by about 6%.
'People's war' Recent upward pressure on prices has been caused by a series of attacks in Mexico as well as concerns over the impact of hurricanes on oil infrastructure in the Gulf of Mexico.
The dozen or so attacks on Mexico oil and gas facilities - which pushed crude prices to near record highs - have been blamed on a left-wing rebel group.The dozen or so attacks on Mexico oil and gas facilities - which pushed crude prices to near record highs - have been blamed on a left-wing rebel group.
Mexican officials have insisted that although the country's gas output had been cut by a quarter, oil exports would not be affected.
The attacks were claimed by the People's Revolutionary Army, as part of what it says is a "prolonged people's war" against "the anti-people government".
Experts say it is a very secretive but also very small grouping.