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. Last Updated: 07/27/2016

OPEC Agrees to Boost Output

VIENNA, Austria -- OPEC on Sunday agreed to raise production to stave off an oil price shock threatened by a strike in Venezuela and war in Iraq.

The Organization of the Petroleum Exporting Countries lifted output 7 percent, adding 1.5 million barrels per day for a new 10-member limit of 24.5 million bpd, the top end of expectations.

That will only go part of the way to compensate for an estimated 2-million-bpd stoppage from Venezuela because Caracas was granted its share of the higher limit and many others in OPEC have no spare capacity.

"Lack of capacity means actual additional oil will probably be less than half that promised on paper," said Gary Ross, chief executive of U.S. consultancy PIRA Energy. "OPEC production will still be less than had there been no Venezuelan disruption."

Political sensitivities in the cartel mean the extra oil was divided pro-rata, but key to flows now will be how quickly, and how far, leading producer Saudi Arabia opens the taps.

Riyadh controls most of the world's spare capacity and can only count on the United Arab Emirates for any substantial help. Algeria and Nigeria may be able to pump a little more.

Saudi Oil Minister Ali al-Naimi said he wants to prevent oil spiking to heights that might harm world economic growth.

U.S. oil recently rose above $33 per barrel for the first time in two years and closed at $31.58 on Friday.

Naimi said Saudi Arabia already had moved to make up the shortfall. "There is no shortage. We never allowed the shortage to take place," he told reporters before Sunday's emergency meeting.

He said Saudi could lift flows to 10 million bpd at just two weeks' notice, some 2 million higher than independent estimates of output in December.

"We can get to 10.5 right away, but to maintain that level we need 90 days to formalize contracts for extra rigs with drilling companies," Naimi said.

But oil prices do not look like falling sharply any time soon.

"The oil market is still tight," said Ross of PIRA. "This will provide some relief but the extra will not arrive until the end of the first quarter."

An assault on Iraq, cutting another 2 million bpd, could leave OPEC floundering, if Venezuelan oil is not restored.

Worse, according to Ali Rodriguez, president of state oil company Petroleos de Venezuela SA, sabotage at oil fields, refineries and computer systems would prevent a return to production.

Venezuelan Oil Minister Rafael Ramirez said his country's output now was 800,000 bpd and would reach 2.5 million bpd by mid-February.

OPEC will review output when it meets again on March 11.