Mumbai: Iran has dismissed the possibility of any hike in OPEC production as it would only lead to an increase in oil reserves. Iranian oil minister Gholamhossein Nozari also dismissed Saudi Arabia's decision to boost oil output as a "political move" aimed only at appeasing its ally, the US.

Asked whether the 13-member cartel would increase production as requested by the United States, Nozari said, "No, because I think a hike in output will add to an increase in reserves."

The minister was speaking a day after OPEC kingpin Saudi Arabia announced a modest increase in output after an appeal from visiting US president George Bush.

News agency reports said Saudi Arabia had agreed to boost crude output by 3.3 per cent, or 300,000 barrels per day, to loosen up the market and make up for declines in other OPEC nations.

"This action is more of a political move ... this action will only help to increase reserves," Nozari said.

Ecuador, OPEC's smallest producer, also has offered to consider raising output to stem the oil rally because high prices are hurting the poor.

Iran, the second-largest OPEC producer after Saudi Arabia, blames oil price rise on a weak US dollar and other factors outside OPEC's control.

Tehran maintains that the market is well-supplied with crude even as prices shot up to a record high near $128 a barrel on Friday.

OPEC members, including Saudi Arabia, maintains that the rise in global oil prices in recent years has more to do with financial market volatility than oil's fundamentals.

Saudi oil minister Ali al-Naimi also blamed increased speculative trading, a weakening US dollar and other factors beyond OPEC's control for the rapid rise in oil prices, which have quadrupled in the past five years.

Most of the – around 60 per cent - incremental demand for oil by the year 2030 will come from Asian consumption, which is expected to rise by 20 million barrels per day, Naimi said in a speech at the Seoul National University.

"The short-term oil price gyrations seen in recent years are more closely tied to the internal logic of the financial markets than to underlying supply/demand fundamentals," Naimi said in his speech.

Naimi said the supply outlook remained bright despite a lack of spare crude output capacity and tight refining capacity.

Proven global oil reserves have risen from 667 billion barrels in 1980 to to 1.2 trillion barrels now. The world has consumed some 700 billion barrels in the interim.