- The Washington Times - Tuesday, September 20, 2005

VIENNA, Austria (AP) — OPEC yesterday offered world markets an extra 2 million barrels of oil a day — its entire spare capacity — in an attempt to show that supply fears were unfounded, even as traders eyed another hurricane approaching the Gulf of Mexico.

The cartel, which has come under international pressure over the near-record prices that came after Hurricane Katrina, said its output ceiling would remain at 28 million barrels per 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.”

Yesterday’s offer came as Tropical Storm Rita strengthened into a hurricane while it lashed the Florida Keys, but prices fell as forecasters wavered about 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 yesterday on the New York Mercantile Exchange.

OPEC ministers decided against raising the cartel’s output quota by 500,000 barrels per 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 market 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 the result of 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 (IEA), 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,” Mr. Naimi said in response, adding that if consumers had any doubt, “all they have to do is ask us.”

Mr. 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.


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