The 11-member cartel -- which produces around one-third of the world's oil -- is expected to temporarily raise production quotas by as much as 10 percent as a way of maintaining price stability.
[Kuwait and Qatar today said OPEC has decided to raise its oil output ceiling by 2 million barrels per day (bpd) on 1 July and add another half a million bpd on 1 August.
Qatar's oil minister, Abdullah bin Hamad Al-Attiya, and Kuwaiti Oil Minister Sheikh Ahmad Al-Fahd al-Sabah made the announcement minutes before the opening of the OPEC meeting. Western news agencies quoted officials from other OPEC member states as saying that there was no discussion on raising their official price target from $22 to $28 a barrel.]
Oil prices have risen to record highs in recent days amid concern that terrorist groups are planning to target oil installations in the Middle East. Prices soared to more than 42 dollars a barrel this week after suspected Al-Qaeda terrorists took oil workers hostage in Saudi Arabia in an attack that left 22 foreigners dead.
Adam Sieminski, an oil analyst at Deutsche Bank in London, told RFE/RL that the threat of terrorism is only one of many factors driving the price of oil higher: "Worries over Saudi Arabia; worries over Iraq. Concerns over [oil production in] Venezuela and Nigeria even. There is a gasoline problem in the United States that is contributing to higher crude oil prices. And the weakness of the dollar is encouraging OPEC to be tougher on prices. So all of that is probably adding 10 or 12 dollars [a barrel] to the price of oil."
Economists say if the price of oil goes much higher and stays relatively high, the global economic recovery now under way could be endangered.
Saudi Arabian Oil Minister Ali al-Nuami yesterday sought to allay fears prices would rise much higher. He pledged to restore prices to a stable band well below where they are today: "The [Saudi] kingdom will work with OPEC countries to put [oil] prices within a price-band of $22-$28 for OPEC sales."
OPEC members -- led by Saudi Arabia -- were widely expected today to raise their collective production quota of 23.5 million barrels a day to alleviate some price pressures. As part of that effort, the United Arab Emirates yesterday said it would increase oil production by 400,000 barrels a day over its OPEC quota.
The move comes amid strong pressure by consumer nations like the United States, the European Union, and Japan to add more oil to global supply. Yesterday, EU finance ministers appealed to oil producers to provide what they called an "adequate" supply of crude so as not to imperil Europe's fragile economic recovery.
Sieminski told RFE/RL that he believes the OPEC measure could add as much as 1 million barrels of oil a day into global supply by July and help somewhat to ease prices. The world consumes around 80 million barrels of oil a day.
It's unclear, however, how far prices can fall since OPEC members are already pumping far in excess of their official quota. In the past, markets have generally ignored pledges to raise output quotas -- seeing such announcements as mostly symbolic.
Many OPEC members are also producing at or near their output limit. Only Saudi Arabia -- among OPEC members -- is believed to have any significant spare capacity.
In any event, OPEC's ability to affect price may be limited by the "fear factor" -- the hard-to-quantify risk posed by international terrorism.
No one knows how much of the price of oil is simply a risk premium, but this week's 5 percent run-up in prices after the Saudi hostage incident showed how sensitive the market is to threats to Saudi production.
OPEC, whatever its influence in oil production, cannot guarantee its facilities are totally safe from an Al-Qaeda attack.
This fear of terrorism is already shifting the balance of power in oil markets away from OPEC in favor of major non-OPEC producers like Russia. At least that's the argument of Christopher Weafer, a strategist at Moscow's Alfa-Bank, in a contribution this week to "The Moscow Times."
Weafer wrote that Russia's standing in the eyes of the United States, the EU, Japan, and China can only rise as fears mount over further terrorist attacks in Saudi Arabia.
Weafer said this could open the doors to long-term Russian economic objectives, such as joining the World Trade Organization. He says the United States, "under the umbrella of the Russia-U.S. energy dialogue, is already pushing Russia to facilitate more investment in oil production and in the provision of greater export capacity."