OPEC producers today agreed a two per cent increase in oil supplies in a bid to rein in $55 crude.
The Organization of the Petroleum Exporting Countries raised production limits by 500,000 barrels a day to 27.5 million bpd, said OPEC President Sheikh Ahmad al-Fahd al-Sabah.
The agreement gives Sheikh Ahmad the power to trigger an additional 500,000 bpd later in the second quarter should prices stay high. Ministers scheduled their next meeting for June 7th.
Saudi Oil Minister Ali al-Naimi said Riyadh was aiming to bring crude down to $40-$50 a barrel, the first time the world's biggest oil exporter has advocated support for prices that high.
"Current oil price levels of $55 are high and we want prices to be between $40 and $50 a barrel," Mr Naimi told the London-based Arabic-language Al-Hayat newspaper.
"We will increase the ceiling by 500,000 and another 500,000 will be with the president to authorise if prices remain as they are or rise," said Sheikh Ahmad.
US crude traded off 34 cents to $54.64 a barrel and London Brent eased 33 cents to $53.38 a barrel.
"OPEC are doing their best but it is a train that is difficult to stop," said Mr Bob Finch, head of trade at independent oil trading house Vitol SA.
Crucial for traders will be how much actual extra oil OPEC's deal delivers.
Sheikh Sabah said the pact would bring 500,000 bpd of real new supply in April.
Gulf OPEC delegates said Saudi Arabia and Kuwait wanted to ensure real volumes were delivered to permit world inventories to build in the spring, when seasonal demand is at its lowest ebb.
The only producers with much spare capacity to tap, the two are ready to pump actual extra volumes of 500,000-700,000 bpd in the second quarter, the delegates said.
They said Gulf producers want to ensure a bigger-than-normal second quarter stockbuild to avoid further upward pressure on oil prices later in the year.