AFP is reporting today that OPEC’s secretary general, Abdalla Salem El-Badri, has stated that the cartel "plans to lift production capacity by five million b/d by 2012." El-Badri’s also noted that OPEC planned to boost production capacity by nine million b/d by 2020. So far, the report has had no impact on oil prices, which are up $0.80 to $118.28/b.
Really, there’s no reason to expect this sort of news to have any impact at all on oil prices. OPEC’s excess capacity stands at two or three million b/d, depending on whose numbers you believe, so doubling that in four years doesn’t mean much. Current OPEC production stands at about 32 million b/d. The stated increase by 2012 raises production to 37 million b/d and the increase by 2020 raises capacity to 41 million b/d. The U.S. EIA has predicted OPEC liquids production to reach 40 million b/d by 2012 and 46.7 million b/d by 2020. That is not a formula for lower oil prices.
OPEC is also concerned about "demand security;" that is, if they pump it out, will there be a buyer for it? OPEC expresses concern about expanded development of biofuels, essentially threatening to slow down production until the rest of the world guarantees a market for its oil. Russia has had mixed success with its demand security position for its natural gas exports to Europe, but what success Russia has had only strengthens OPEC’s hand.
The short version of this story is that even if crude oil production could reach expected demand levels, the price for that oil will not fall. Ever.