By Bruce Stanley
The Associated Press

LONDON - With the price of oil stuck above $40 a barrel, OPEC decided Thursday to raise its daily production target by 500,000 barrels, or 2 percent, in an effort to keep crude prices from lurching even higher.

The Organization of Petroleum Exporting Countries made the increase automatically, by mutual agreement, and canceled a formal meeting it had planned for its members July 21 at its headquarters in Vienna, Austria, said OPEC president Purnomo Yusgiantoro. The increase will take effect Aug. 1.

Although oil-exporting countries are happy to maximize profits, OPEC and its de facto leader Saudi Arabia worry that global economic growth and the long-term demand for crude could suffer if prices spike to punishing heights.

However, few analysts expect the increase in OPEC's target to do much to reduce prices from current levels. Most of the group's members are already pumping all they can to satisfy strong demand, and oil markets had already factored the increase into prices.

Contracts of U.S. light crude for August delivery fell 20 cents to settle at $40.77 a barrel Thursday on the New York Mercantile Exchange.

OPEC, which pumps more than a third of the world's oil, agreed last month to make a two-step increase in its output ceiling, to try to calm concerns about disruptions in oil supplies from Iraq and a possible terror attack on export facilities in Saudi Arabia. The group decided first to raise its ceiling by 2 million barrels on July 1, and agreed to follow up with a second increase of 500,000 barrels on Aug. 1 if market conditions warranted.

Fresh concerns about supplies have contributed to strong prices since then. Chronic strife in Venezuela and Nigeria, legal problems for Russia's biggest oil company Yukos, and recurring sabotage on export pipelines in Iraq have all added to fears of a possible shortage.

OPEC members took the exceptional step of canceling next week's meeting, agreeing there was no longer a need for it. Purnomo, who is also Indonesia's energy minister, stressed that they still would "closely monitor" market conditions.

OPEC's production target is now 25.5 million barrels a day, rising next month to 26 million barrels.