OPEC sought to reassure edgy oil markets today that crude supplies are plentiful after another storm whipped up fears that hurricane-ravaged refineries along the battered U.S. Gulf Coast could take a new hit.
Oil ministers of the Organization of Petroleum Exporting Countries were debating whether to make available 2 million extra barrels of oil a day — or boost the group’s current output ceiling of 28 million barrels a day by 500,000 barrels — to ease worries about fuel costs as the winter heating season approaches in the northern hemisphere. But both options were seen as largely symbolic. The cartel already is pumping about 28.5 million barrels a day, and making extra crude available would not change the fact that the world’s refineries can’t keep up with demand.
“There is no need for new oil on the market,” said Iran’s acting oil minister, Kazem Vaziri.
Prices soared back above $67 a barrel — a jump of more than $4 — on 19th September as Tropical Storm Rita gained strength. Heating oil surged more than 20 cents a gallon while gasoline rose nearly 26 cents a gallon. But crude oil for October 2005 delivery on the New York Mercantile Exchange fell back $1.09 to $66.30 in midday trading 20th September in Europe despite lingering worries about whether Rita could inflict more damage on U.S. refineries hit by Hurricane Katrina.
OPEC President Sheik Ahmed Fahd Al Ahmed Al Sabah, who is also Kuwait’s oil minister, said most members backed the proposal to offer 2 million extra barrels of oil a day, and that the 2 percent increase in the production ceiling also might be approved. The 2 million barrels would come from the spare capacity of OPEC members, although Saudi Arabia is the only country able to provide significant extra crude. Kuwait and the United Arab Emirates also could contribute.
The European Union asked OPEC on 20th September 2005 to provide the extra barrels. “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.
Saudi Oil Minister Ali Naimi called Katrina’s impact “only a blip for the market” over the long term, but he said the oil-rich kingdom has the capacity to immediately raise its oil production from around 9.5 million barrels a day to 11 million barrels a day if needed. “The crude is available,” Naimi said. “If you want it, there it is.” He said OPEC’s aim was to “show good intent” and to emphasize that oil was available at a time when the markets are worried about supply disruptions.
“It’s tough to blame (OPEC) for higher oil prices. I think they’re doing what they can,” said Jason Schenker, an economist with Charlotte, N.C.-based Wachovia Corp., the fourth-largest U.S. bank. “The current meeting and whatever comes of it will be overshadowed by Rita,” he said. Nigeria’s oil minister, Edmund Daukoru, said OPEC was “very concerned” about Rita’s potential effects, and analysts warned that the storm had the potential to cause further problems for the oil industry.
“We really can’t afford to lose more production,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. “The market is much more focused on Rita,” Flynn said. “OPEC is kind of secondary concern to the market. OPEC is already pumping as much as they can, so raising or not raising the ceiling is not going to make a difference.”
Libyan Oil Minister Fathi Hamed bin Shatwan said OPEC was likely to test the market with the additional 2 million barrels a day. “Who will buy it is welcome — to test the market and to show that there is no need (for an output hike),” he said. “We say the market is well-supplied and people don’t believe us.”
Although the Saudis were pressing for a higher quota, previous OPEC increases have done little to ease market fears over supply.
Daukoru dismissed a higher output ceiling Tuesday as a meaningless “gimmick,” insisting that adding 2 million barrels a day would be “a much more pragmatic approach.” He said 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. Most ministers maintain that the market is well supplied with crude and the problem lies with refining products.
Source: AP
