Oil producers meeting in Lebanon acknowledged that additional demand is caused by political turmoil, but hiked production levels anyway. Mohalhel Fakih reports from Beirut A decision made by the world's top oil producers at a meeting in Beirut on Thursday to boost output by 2.5 million barrels a day in July and August helped curb record high prices to below $40 per barrel and brought relative calm to international markets -- at least for now. But Middle East turmoil and stringent US refinery regulations, which have been driving prices up ahead of the busy summer season, are beyond the control of the Organisation of the Petroleum Exporting Countries (OPEC), the oil cartel warned. A call by US Energy Secretary Spencer Abraham for American oil refineries to run at full capacity could also help restrain prices. Abraham told reporters in Washington, on the day OPEC met in Beirut, he received assurances from oil refineries that they would operate at full capacity. "I made it clear to them that we wanted to see no diminishment in refining capacity during this peak summertime period," Abraham said. "Prices have been hovering around 42 to 43 dollars. This is really hurting the world economy, so there has to be a solution. You would not expect OPEC to solve all the problems. We need cooperation and participation from OPEC and non-OPEC members," Abdul-Rahman Al- Kheraigi, OPEC's spokesman told Al-Ahram Weekly at the Phoenicia Intercontinental Hotel in Beirut where representatives of the 11- member cartel, and non-members Egypt, Oman, Syria and Angola, met for OPEC's 131st extraordinary meeting. "We have decided to lift the ceiling to 25.5 (million barrels a day) effective 1 July and 26 million barrels per day effective 1 August and we will meet to review future action on 21 July in Vienna," Saudi Oil Minister Ali Nuaimi told reporters. Ministers and OPEC governors were under strong pressure to hike oil production, which accounts for about one third of the global oil supply. Members had already been producing more than 26 million barrels per day to keep oil prices down. Nuaimi said the production boost only aimed to "reverse the perception" that oil supplies could be disrupted, and made clear that there is no shortage of oil on the market. In Beirut, Nuaimi also denied, to throngs of reporters, that Saudi oil exports would fall following last week's hostage crisis and shooting rampage in Khobar that killed 22 people, mainly foreigners. "Only a handful of Western experts left the country. Most of the foreign staff remained in the kingdom ... More than 86 per cent of the people working in these installations are Saudis," Nuaimi said. Iran's OPEC Governor Kazem-Pour Ardebili conceded that "fear is creating additional demand", and cited the "occupation in Iraq" and "events in another nation in the region" -- an apparent reference to Saudi Arabia -- as geopolitical factors that have been driving up prices, but he told the Weekly "there is no likelihood of [supply] disruptions." OPEC's President Purnomo Yusgiantoro, who is Indonesia's minister of energy and mineral resources, used his opening address to absolve the cartel of blame for rocketing prices. "The high prices have been caused by a combination of factors over which OPEC has no control -- speculation on future markets, tightness in the US gasoline market, geopolitical concerns and higher than expected oil demand growth, especially in China and the USA," he said. Ardebili told the Weekly stringent US quality control and gasoline production regulations in the largest world consumer are partly to blame for rising prices. Iran has feared a price tumble if more oil is pumped and only wanted a one to 1.5 million barrel per day increase. The two- stage hike was a compromise between Tehran and Riyadh. "We decided to increase two million barrels of oil per day [in July] but we know that the driving season will be starting soon," OPEC's president said, while not mentioning the US -- or the summer vacation habits of Americans -- by name. Meanwhile, Yusgiantoro welcomed the participation of Egypt and other non-OPEC members at the Beirut meeting as an indication of "the importance they attach to constructive dialogue". Egypt, taking part as an observer at the Beirut meeting, urged cooperation between OPEC and non-OPEC members to curb oil prices. Petroleum Minister Sameh Fahmi told delegates of the gathering that oil prices should support "development plans" around the world. "We always believe in enhancing cooperation and our ties with non-OPEC producers. This is the best way to come up with a coherent policy regarding oil policies," OPEC spokesman, Al-Kheraigi, told the Weekly. The extraordinary meeting was held for the first time outside OPEC's headquarters, now in Vienna. Beirut had been a venue for several cartel meetings before the 15-year long civil war erupted in 1975. The energy-poor country, now on a reconstruction and development drive, is making a bid to host OPEC's headquarters. "I am announcing it now. We are seeking to have the OPEC headquarters in Beirut; that they move from Vienna to Beirut," Prime Minister Rafik Hariri told CNBC-Arabiyah TV. Though Al-Kheraigi said no formal request has been made, he told the Weekly, "It has been really nice to return to Beirut after almost three decades. We are looking forward to coming back to Beirut in the near future." Signalling possible future difficulties ahead for Lebanon in its bid, Libya, which has been at odds with Beirut over missing Shia cleric Sayyid Mussa Sadr, bowed out of Thursday's meeting. The cleric went missing on a trip to Tripoli in 1978. The Shia community has blamed Libyan leader Muammar Gaddafi for his disappearance. Libya, which in April said its reserves could exceed 100 billion barrels (around 10 per cent of current total world reserves), so far did not comment on Lebanon's invitation.
