OPEC agrees to offer extra crude as new storm triggers fresh fears | VailDaily.com

OPEC agrees to offer extra crude as new storm triggers fresh fears

Associated Press

VIENNA, Austria – OPEC offered world markets an extra 2 million barrels of oil a day – its entire spare capacity – on Tuesday in an attempt to show that supply fears were unfounded even with traders eyeing another hurricane approaching the Gulf of Mexico.The cartel, which has come under international pressure over the near-record prices that followed Hurricane Katrina, said its output ceiling would remain at 28 million barrels a day and stressed that the main obstacle is refining capability, not a shortage of crude.”If you have a buyer, bring him, we’ll give him the 2 million. We have the availability to provide it,” said OPEC President Sheik Ahmed Fahd Al Ahmed Al Sabah, who is also Kuwait’s oil minister.He said the 2 million barrels, representing all the spare capacity of the Organization of Petroleum Exporting Countries, would be available for three months beginning Oct. 1.”We hope that this will reflect positively on prices,” Sheik Ahmed said. “We are very keen to help the market. We know there are geopolitical and weather crises.”Tuesday’s offer came as Tropical Storm Rita strengthened into a hurricane while it lashed the Florida Keys, but prices fell as forecasters wavered on whether Rita was likely to strike refining centers.After jumping more than $4 a barrel Monday on worries about new destruction to Gulf of Mexico facilities in the wake of Hurricane Katrina, light, sweet crude for October delivery dropped $1.16 to settle at $66.23 a barrel Tuesday on the New York Mercantile Exchange.OPEC ministers decided against raising the cartel’s output quota by 500,000 barrels a day. But both steps were seen as largely symbolic: The cartel said it already is pumping about 28.3 million barrels a day, and making extra crude available will not help the world’s refineries keep up with demand.Valerie Marcel, an energy expert at the Royal Institute for International Affairs, said OPEC was trying to signal that it will provide crude if the markets needs it, but that worries over Rita played a larger role in the market’s reaction.”There’s a feeling of fear in the market,” she said. “Just as it was trying to recover from the effects of Katrina, (the market) now has to deal with the potential of more outages.”Throughout the meeting, OPEC ministers stressed that refining bottlenecks, as well as political instability and weather conditions, are to blame for high oil prices.”I hope all governments will help us to build more refineries,” Sheik Ahmed said. “Whoever is keen about products must help us find a good environment to build.”Sheik Ahmed also rejected comments by Britain’s Treasury chief Gordon Brown, who effectively blamed producers for soaring oil prices, saying the rise in gasoline prices was due to high taxes on byproducts.”I hope Mr. Brown takes the price of oil and gives us the taxes. This is not OPEC’s fault, it’s the taxes,” he said.Most of the 2 million extra barrels will come from Saudi Arabia, the only country able to produce significant amounts of additional crude. The rest will come from Kuwait, the United Arab Emirates and Iran, Sheik Ahmed said.”If the market feels it needs additional crude, they’re welcome to it,” Saudi Oil Minister Ali Naimi said. “It’s there.”Claude Mandil, head of the International Energy Agency, questioned OPEC’s ability to make good on its offer, saying the group could make more crude available, but only between 1 million and 1.5 million barrels per day.”OPEC says it has 2 million. You believe it or not,” Naimi said in response, adding that if consumers had any doubt, “all they have to do is ask us.”Mandil said the IEA may extend its 30-day release of emergency oil and fuel stocks, arranged after Katrina’s destruction of Gulf of Mexico operations, if Rita hits already damaged U.S. installations. He described the OPEC measures as “very limited” gestures.The European Union, which had also called for OPEC to provide extra barrels, expressed similar doubt.”It’s just a small step … I don’t think it’s going to be enough to bring the oil price down,” Rupert Krietemeyer, spokesman for EU Energy Commissioner Andris Piebalgs, said in Brussels, Belgium.Analysts have said that the lack of refining capacity, as well as a surge in demand last year and unrest in producing countries such as Iraq have left OPEC’s hands tied.”It’s tough to blame (OPEC) for higher oil prices. I think they’re doing what they can,” said Jason Schenker, an economist with U.S.-based Wachovia Corp.Although the Saudis had pressed for a higher quota, previous OPEC increases have done little to ease market fears over supply.Nigerian Oil Minister Edmund Daukoru, tapped to take over as OPEC president on Jan. 1, dismissed a higher output ceiling as a meaningless “gimmick,” and insisted that the extra 2 million barrels a day was “a much more pragmatic approach.”He said he considered it unlikely that the 2 million barrels would be needed and that OPEC was worried about a possible glut of crude in the second quarter of 2006 after winter demand subsides. “That’s the period we have to watch,” he said.OPEC said it adopted a long-term strategy plan designed to deal with most market conditions through 2020, which calls for fair and stable prices for producers and consumers, stability of world oil markets and secure global oil demand.”We want to show everybody that we have the ability to provide oil in the future,” Sheik Ahmed said.OPEC’s next meeting will be Dec. 12 in Kuwait.Vail, Colorado