Oil prices are dropping slightly after OPEC announced plans to boost production by 500,000 barrels a day from November. The move is intended to ease concerns among importers about rising oil prices and diminishing supplies.

Wednesday’s announcement came after intensive talks lasting seven hours.

Global crude prices have remained above $US 70 a barrel for some time. Leading consumers such as the United States have argued that the onset of the winter will lead to higher demand, which could push the price beyond the $US 80 threshold.

To allay fears, Saudi Arabia and Iraq said they wanted an increase in oil output. However some countries, including Venezuela and Iran, were fiercely opposed to the move. They argued that demand for oil could slow down because of the U.S. sub-prime crisis and its potential effects on the world's largest oil consumer.

Some analysts say OPEC's decision will not meet its main objective of lowering oil prices: “We don’t think this will significantly impact oil prices. The decision has essentially made the already existing increase official,” says Aleksandr Razuvaev, head of research at Sobinbank.

While Saudi Arabia may have won the latest battle inside OPEC, it has not won the war.  Pumping more oil doesn’t necessarily lead to lower prices. With demand growing, prices are likely to remain high for the short to medium term.