March 16 (Bloomberg) — The Organization of Petroleum Exporting Countries agreed to increase production for the fourth time in less than a year, seeking to end a rally that sent prices near a record, the delegate for Libya said.

The group, which pumps 40 percent of the world’s oil, will raise oil quotas by 500,000 barrels a day as of April 1, then hold talks to consider a similar increase on May 1, Fathi Shatwan of Libya told reporters today in Isfahan, Iran, where the group is meeting. The current production target is for 27 million barrels a day.

Saudi Arabia, OPEC’s largest oil producer, led the call for higher output after consumers including the U.S. said rising energy costs threaten to restrain economic growth. Oil prices have surged almost 50 percent in the past year and are close to $55 a barrel in New York.

“The effect on the market will be negligible,” said Gal Luft, executive director of the Institute for the Analysis of Global Security, a Washington-based company that advises clients on energy policy. “Prices will come down but not dramatically. They will stay within the range of the high $40s and low $50s.”

Crude oil for April delivery yesterday reached $55.45 a barrel on the New York Mercantile Exchange, 22 cents short of the intraday record on Oct. 25.

OPEC countries already are pumping about 700,000 barrels a day more than planned in a failed bid to restrain prices. More than half of its members are pumping at or close to full capacity, according to Bloomberg estimates.

Saudi Arabia is producing 9.5 million barrels a day, leaving 1.5 million a day idle, the nation’s oil minister said this week. The Kuwaiti minister yesterday said OPEC has 2 million barrels of spare capacity ready to be tapped.

Rising Demand

A decision by OPEC to increase production during the second quarter, when demand declines, signals a shift in strategy, with the group allowing inventories to increase for use later in the year, creating a buffer against potential shortages.

“It is clear now that the market is less concerned about the short term build-up of inventories than the longer term concern about continued strong demand growth in the face of limited supply capacity,” said Anthony Nunan, manager of the international oil-trading business at Mitsubishi Corp. in Tokyo, Japan’s largest trading company. “I am bullish, thinking we will take out the previous high and at least challenge $60.”

Higher oil costs led the 30-member Organization for Economic Cooperation and Development to cut its projection for growth this year to 2.9 percent, 0.4 percentage point lower than an earlier estimate.

“Oil prices are too high,” U.S. Treasury Secretary John Snow said last week. “They act like a tax, they reduce disposable income and create headwinds. Fortunately our economy is so strong and so resilient we’ve been able to press through those headwinds.”

The International Energy Agency estimates world oil demand will rise to an average of 84.3 million barrels a day this year, 1.81 million a day, or 2.2 percent, higher than last rear.

Speculators are increasing their bets that prices will advance as economies grow in the U.S. and China and OPEC struggles to meet that demand. Speculative long positions, or bets that prices will rise, have risen for four consecutive weeks and are at their highest since May, according to the Commodity Futures Trading Commission.

OPEC `Irrelevant’

“What will happen after the OPEC meeting is that they will all be producing at capacity,” said Kenneth Deffeyes, professor emeritus of petroleum geology at Princeton University and author of the book Hubbert’s Peak: The Impending World Oil Shortage.

“OPEC is irrelevant,” Deffeyes said in an interview in New York. Saudi Arabia has little or no production capacity beyond what it has been using in recent months, and pumping fields faster may damage them, said Deffeyes, who predicts that global oil output has peaked and will begin to decline.

Oil production growth in Russia, the second-largest oil exporter, this year will be the lowest rate since 1999, when $10 oil restrained development, making consumers more reliant on OPEC, according to the International Energy Agency in Paris.

The agency estimates OPEC will need to produce 29.5 million barrels a day in the fourth quarter to meet demand. The Kuwaiti minister said the figure may be as high as 30.3 million, straining OPEC’s ability to keep pace.