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OPEC ministers ponder offering extra oil
OPEC oil ministers are considering making a one-time offer of 2 million extra barrels a day in an effort to calm a market rattled by refinery shutdowns and concern over supplies for the winter heating season, the cartel's president said Monday, the Associated Press reported.
Sheik Ahmed Fahd Al Ahmed Al Sabah, OPEC's president and also Kuwait's oil minister, said some members of the Organization of Petroleum Exporting Countries were backing a plan to keep the output ceiling unchanged at 28 million barrels a day, but offer an additional 2 million barrels to test demand for crude and cool near record-high prices. Others supported a move to hike the quota by 500,000 barrels a day, or 2 percent. "Consultations are going in a positive way," said Sheik Ahmed. He said a decision on OPEC's output quota could come later Monday. Libyan Oil Minister Fathi Hamed bin Shatwan said OPEC was likely to test the market first. "We'll say there is 2 million barrels a day available here," he said. "Who will buy it is welcome; to test the market and to show that there is no need (for an output hike). We say the market is well supplied and people don't believe us." Shatwan said some ministers felt there was no need to alter the current quotas. The OPEC president "will agree to this," he said. "We're facing a problem in showing the international market that we're prepared to help." A ceiling hike "has no meaning now. A lot of us are at full capacity and we couldn't do anything extra," he added. Algerian Oil Minister Chakib Khelil said the offer of 2 million extra barrels was an attempt at stabilizing the market. "That's the signal we're going to give. This one has the merit of proposing something concrete, offering to put on the market quantities which will help stabilize (the price), which we need," Khelil said. Initially, most ministers appeared to support a 500,000-barrel-a-day increase, although they maintained that the market is well supplied with crude and the problem lies with refining products. Oil Minister Ali Naimi of Saudi Arabia, the OPEC member with the best capacity to increase production, has said he supports a ceiling hike, but that he also did not see demand for more crude. He did not specify the size of the increase. OPEC's current output ceiling is 28 million barrels a day. "The initial question is where the 2 million barrels are going to come from," said Paul Horsnell, head of energy research at Barclays Capital in London. "If this comes from Naimi's mouth, it has credit, but when you have smaller countries floating this, I would put a big question mark on it." Prices soared after Hurricane Katrina slammed into the U.S. Gulf Coast, a major oil production hub. The storm has been blamed for the evacuation of more than 700 offshore platforms and rigs. Several Gulf Coast refineries have shut down or reduced operations. Light, sweet crude oil for October delivery gained 65 cents Monday to $63.65 a barrel on the New York Mercantile Exchange by midday in Europe, still more than $7 off its all-time intraday price of $70.85 on Aug. 30. Gasoline rose nearly 5 cents to $1.8325 a gallon. On Sunday, Sheik Ahmed said OPEC may even need to act again before the end of the year as U.S. refineries hit by Katrina recover and the Northern Hemisphere's winter sets in. "I think in November some refineries will come back in the south of the United States, and if the winter is cold, we have to do our best to increase real production," he said. Previous OPEC increases have done little to ease market fears over supply. Besides concern about production outages after Katrina, prices were also driven higher by worries about instability in Iraq and the upcoming winter. But OPEC also risks sharper price declines, as high prices seem to have taken a toll on demand.
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