OPEC Offers Spare Oil Supplies
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 as traders watched another hurricane approach the Gulf of Mexico.
The cartel, which has come under international pressure over high prices, said its output ceiling would remain at 28 million barrels a day and stressed that the main obstacle was refining capability, not a shortage of crude.
“We hope that this will reflect positively on prices,” 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.
Tuesday’s offer came as Tropical Storm Rita strengthened into a hurricane, but oil prices fell as forecasters wavered on whether Rita was likely to strike refining centers. The expected path of Rita has shifted to the south, away from damaged plants in Louisiana and Mississippi, the National Hurricane Center said.
“The hurricane may end up being a big nothing,” said Antonio Szabo, chief executive of Houston-based consultant Stone Bond Technologies. “If it misses oil facilities or the damage isn’t too bad, prices will fall further.”
Crude oil last month traded as high as a record $70.85 a barrel in New York after Hurricane Katrina shut refineries and curtailed production in the Gulf of Mexico. Concern about Rita caused oil on Monday to jump $4.39, or 7%, to $67.39 a barrel on the New York Mercantile Exchange. On Tuesday, the October contract for light sweet crude, which expired at the end of the trading session, dropped $1.16 to $66.23 a barrel.
Natural gas for October delivery fell 17.1 cents, or 1.4%, to $12.492 per million British thermal units on the New York Mercantile Exchange. It closed Monday at $12.663, the highest since futures began trading in 1990.
October heating oil fell nearly 3 cents to settle at $2.011 a gallon, while October gasoline dropped nearly 7 cents to $1.977 a gallon.
“The issue is getting refining and processing rates up, particularly in the gulf,” said David O’Reilly, chief executive of San Ramon, Calif.-based Chevron Corp., the second-largest U.S. oil company, at a conference Tuesday in London. “I’m less concerned about the short-term oil supply. Today there is crude oil in the market.”
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Associated Press and Bloomberg News were used in compiling this report.
