But increase is slightly less than sought by Saudis as Iran expresses concern.
June 3, 2004: 9:15 AM EDT
BEIRUT, Lebanon (Reuters) - OPEC agreed Thursday to raise oil output by two million barrels a day, or 8 percent, in a bid to ease crude prices from $40 a barrel, Qatari Oil Minister Abdullah al-Attiyah told Reuters.
The deal by the 11-member Organization of the Petroleum Exporting Countries also promises to add a further 500,000 barrels a day in August, Attiyah said.
But the cartel will meet again on July 21 to review policy.
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"It's a good agreement, we will be able to test the impact of the policy on the oil market before we meet again in July," Attiyah said.
The deal raises formal group output limits to 25.5 million barrels daily but will be a disappointment for those expecting OPEC to deliver more. It appears to be a compromise between Saudi Arabia and countries like Iran and Venezuela who feared a price collapse.
OPEC's biggest producer Saudi Arabia had pressed for 2.5 million barrels daily immediately. Riyadh wants to prevent high oil prices derailing world economic growth and stunting world fuel demand.
Oil prices rose as traders interpreted the outcome as delivering less crude than was expected.
"This is bullish," said Nauman Barakat of the Refco brokerage in New York. "Forget the promise of another 500,000, this is just plain two million. The market was convinced it would get 2.5 million so this could wave a red rag to the bulls."
U.S. crude up 34 cents at $40.30 a barrel.
Oil prices have been around the $40 mark for the past three weeks, fueled by strong world economic growth and worries about supply security in the Middle East.
Concerns about political instability in Saudi Arabia were inflamed Saturday by a deadly attack by Islamic militants in the Saudi oil city Khobar.
The details of OPEC's final agreement are unlikely to make a lot of difference to actual supplies from the cartel that controls more than half the world's oil exports.
That's because group output already is at least 2.3 million over existing formal limits of 23.5 million bpd.
Regardless of official policy, Saudi and the United Arab Emirates together say they are already delivering about a million barrels daily of real extra oil in June to meet rising demand.
Others in OPEC are at, or close to, full capacity.
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