OPEC oil ministers agreed Friday to raise the cartels' prices and restrain production in hope of forcing up crude prices by several dollars in the next few months.
All 13 ministers of the Organization of Petroleum Exporting Countries signed the accord raising their target price from $18 a barrel to $21. Because of an oil glut, the actual price recently has been about $16.25 per barrel.Each dollar increase per barrel raises gasoline prices at the pump by about 5 cents a gallon.
The agreement set a new output ceiling of 22.5 million barrels a day, a bit above the current cap but lower than the cartel's actual production. To reach the new target price, OPEC will have to rein in production by about 700,000 barrels a day.
Word of the agreement sent oil prices higher in international trading. In London, North Sea Brent jumped 39 cents from Thursday to $19.65 a barrel for September delivery. West Texas Intermediate, the benchmark grade of U.S. crude, rose 9 cents to $20.39 for September delivery per 42-gallon barrel.
Iranian Oil Minister Gholam Reza Aqazadeh said the agreement would be valid through the end of the year. Asked if the output levels would be adhered to, he said, "At this time I am sure 100 percent."
Crude prices - and gasoline prices at the pump - would not automatically climb just because OPEC notched up its benchmark. But if the cartel reined in production, crude prices could rise.
The announcement capped the regular midyear OPEC meeting, which began Thursday and was overshadowed by a bitter dispute involving Iraq, Kuwait and the United Arab Emirates.
Iraq blamed the other two for a drop in prices, saying they had exceeded their output quotas. Kuwait and the UAE deny the accusations.
Iraqi President Saddam Hussein threatened last week to use force against cheaters, and diplomats reported an Iraqi military buildup at the Kuwait border.