Vienna – 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, stressed that the main obstacle to high prices 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 also is Kuwait’s oil minister.
He said the 2 million barrels, representing all the spare capacity of the Organization of the 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 that making extra crude available would 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.”
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.
