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RIYADH, Saudi Arabia -- In an attempt to ease prices that topped $50 per barrel for the first time, Saudi Arabia, the world's largest oil exporter, will raise production capacity from 9.5 million barrels per day to 11 million barrels the oil ministry said Tuesday, according to the Associated Press.
By increasing capacity, Saudi Arabia will be able to raise production when it wants. A Saudi oil ministry official, speaking on condition of anonymity, said that the kingdom would increase production, "depending on demand."
Oil Minister Ali Naimi announced that the capacity increase would come into effect in the next few weeks, using fields where production has just begun. "The fields of Abu Safa and al-Qatif, which have just started production, will be used to increase the kingdom's production capacity in the coming few weeks to 11 million barrels per day," Naimi said in a statement.
Producers have been seeking ways to calm markets after an announcement two weeks ago that the OPEC cartel would boost its production target by 1 million barrels per day beginning in November failed to bring down prices.
Naimi said last month that his country was willing to provide an extra 1.3 million barrels of oil per day to the world market if required to do so. There has, however, been some concern about whether Saudi Arabia has the excess capacity to significantly boost production.
Word of the decision came as crude oil topped $50 per barrel on Tuesday, pushing past that milestone for the first time. The move was a reaction to the slow recovery of U.S. oil production that was damaged by Hurricane Ivan and unrest and terrorism fears in key producers Saudi Arabia, Iraq and Nigeria.
The price of oil is up about 75 percent from a year ago and is already hurting airlines and other big oil consumers.
Still, adjusting for inflation, today's prices are still more than $30 per barrel below the level reached in 1981 after the Iranian revolution. Economists also point out that the country is more energy efficient than it was two decades ago -- due to conservation measures taken after prices skyrocketed and because the industrial sector has shrunk dramatically.