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VIENNA, Sept. 19 - OPEC delegates said today
that the group planned to allow its members to provide up to two
million barrels a day of extra crude oil "if the market needs it,"
effectively setting aside the group's two-decades-long quota system in
order to tame surging oil prices.
The highly
unusual decision to put on call an extra 7 percent of its production is
expected to be formally announced Tuesday, at the end of the group's
two-day meeting here. Some oil ministers said the Organization of
Petroleum Exporting Countries wanted to show it was doing all it could
to help lower
oil prices even as they blamed refining shortages for the current
situation.
But the
attention of oil traders was focused today on news that Tropical Storm
Rita, the 17th named storm of the Atlantic hurricane season, was making
its way towards the Gulf of Mexico.
These reports
pushed up oil and gasoline prices on the New York Mercantile Exchange.
This afternoon, crude oil for October delivery surged $4.39, or 7
percent, to $67.39 a barrel. October gasoline jumped 25.76 cents, or
14.4 percent, to $2.0427 a gallon.
Several major
oil companies said they were evacuating some employees from offshore
oil platforms in anticipation of the storm, which the National
Hurricane Center was quickly "nearing hurricane strength" over the
Bahamas this afternoon. Forecasters issued a hurricane warning for
parts of
southern Florida and said the storm could by
make landfall on the Texas coast near Houston, an area that is home to
many refineries, petrochemical plants and a major port, by the end of
the week.
Under the
OPEC proposal, which members discussed in meetings today, the
organization's producers would provide as much oil as refineries and
other buyers ask for, without regards to previous production limits or
quotas. The production ceiling, currently set at 28 million barrels a
day and shared by all 11 members except Iraq, would theoretically
remain unchanged.
"The crude is
available," Ali al-Naimi, Saudi Arabia's oil minister, told reporters
in Vienna.
"If you want
it, here it is."
OPEC's plan,
proposed by Sheik Ahmad Fahad al-Ahmad al-Sabah, the group's current
president and the oil minister from Kuwait, has the backing of Saudi
Arabia, OPEC's largest producer, which would provide 75 percent of the
additional oil.
Indeed, the
proposal is largely shaped around an earlier pledge by Saudi Arabia to
open its taps fully to consumers who asked for more oil.
Saudi
Arabia's commitment to the nation's oil output up to its full limit of
11 million barrels a day, up from 9.5 million barrels now, was repeated
after Hurricane Katrina interrupted oil production from the Gulf of
Mexico three weeks ago, sending crude oil above $70 a barrel.
But the
divergence between the oil market's focus and OPEC's plans illustrates
the group's problem.
Many
delegates here emphasized repeatedly that the real shortfall in energy
markets was not one of crude oil but of refining capacity - the current
inability of refiners to turn oil into sufficient quantities of
gasoline and other products like diesel or jet fuel.
"There is no
issue with crude oil supplies," said Abdullah bin Hamad al-Attiyah, the
oil minister from Qatar. "The real shortfall is in refineries,
especially in the United States. We can do everything we can, except we
can't interfere with the nature of the problem."
Still, he
said OPEC hoped to strike a psychological point with oil traders who
have been bidding up oil prices over the past two years largely on the
assumption that the growth in demand was outstripping the ability of
suppliers to bring more oil on the market. That has led to a doubling
in oil prices over the past two years.
OPEC also
wanted to respond to mounting criticism from consuming nations,
especially in Europe, who have put pressure for OPEC to act more
forcefully. Many are beginning to worry that high oil prices might slow
growth and hurt the global economy.
According to
OPEC's most recent statistics, the group pumps about 28.2 million
barrels of oil a day, about a third of global production and 40 percent
of global exports.
Since 2003,
OPEC producers have increased their output by 10 percent to make up for
a 5 percent jump in global oil demand. That increase leaves only one
OPEC members, Saudi Arabia, with large spare capacity. Sheik Ahmad, the
OPEC president, said Nigeria, the United Arab Emirates and Libya could
provide an extra 400,000 barrels a day by December.
At their
meeting today, OPEC's ministers also discussed their long-term strategy
and make their investment plans more transparent. The group dropped an
earlier suggestion to raise the production ceiling by 500,000 barrels a
day, an idea that had been floated by some OPEC officials in the days
leading to the meeting.
"We will
collectively make a pledge to have the spare capacity available if
needed, but I don't believe it is needed," Edmund Daukoru, Nigeria's
oil minister, told reporters.
To illustrate
the availability of oil on the market, many pointed out that the United
States Energy Department had recently found buyers for only 11 million
barrels of crude oil from the nation's strategic reserves, just a third
of the amount it had put on sale.
"It proves
there is no need for oil," Mr. Attiyah of Qatar said. "There is a need
for products."
At the White
House today, President Bush said he welcomed a release of more oil by
OPEC members because it would help lower retail gasoline prices by
increasing supply.
"I have been
concerned about the price at the pump that our folks are paying," Mr.
Bush said.
"Part of that
was caused by the disruptions of Hurricane Katrina. We dealt with that
by suspending rules and regulations that enable us to import more
gasoline. But part of the cost of gasoline is a result of high crude
oil prices, and one way to affect those prices is to conserve and the
other way is to encourage an increased supply."
Hurricane
Katrina crippled the United States' main oil and gas production region,
sending energy markets into a tailspin. But perhaps of greater concern
for energy markets, it caused the shutdown for four major refineries
along the Gulf Coast. These refineries, which can process nearly
900,000 barrels a day, or 5 percent of American capacity, are likely to
be out of
commission
for months.
The refining
crunch in the United States caused gasoline supplies to dip, led to
spot shortages in some corners of the country, and pushed gasoline
prices above $3 a gallon nationwide for the first time.
As a response
to that shock, consuming nations dipped into their oil reserves to make
up for the production shortfall from the Gulf of Mexico. The crisis
prompted the Bush administration to tap into the nation's strategic
stocks, something it had always been very reluctant to do.
In addition,
the International Energy Agency, which usually provides advice on
energy policies to 26 industrialized nations, activated its emergency
oil plan, releasing oil for only the second time in its 29-year history.
But in New
York, oil traders were concerned that the strengthening Tropical Storm
Rita could hit the Gulf of Mexico at a time when more than half the oil
production there still remained shut following the impact of Hurricane
Katrina. In preparation for the storm, energy companies had evacuated
3.73 percent of rigs in the gulf as of 12:30 p.m. Eastern time today,
up from 1.49 percent on Friday, according to the Interior Department.
Officials
from Royal Dutch Shell and Chevron said they had started removing some
employees from platforms and rigs and were closely watching the storm
to see if more evacuations were needed.
Murphy Oil,
an independent producer, said it was clearing equipment off platforms
today and would start evacuating employees on Tuesday. "If the crews
are evacuated that does hamper any efforts that we have underway" to
repair facilities damaged by Katrina, said Dory Stiles, a spokesman for
Murphy.
Ray Carbone,
an oil trader at Paramount Options, told Bloomberg Television: "This
storm has put the OPEC meeting into the back seat - and marginalized
it." Lawrence J. Goldstein, president of the Petroleum Industry
Research Foundation, said OPEC members "want to appear to be
responsible but the tools that they have in the bag render them largely
impotent for the moment."
Vikas Bajaj
contributed reporting from New York for this article.
* Copyright
2005 The New York Times Company
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