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OPEC Agrees to Lift Its Limits on Oil Sales :

Posted on: Wednesday, 21 September 2005, 12:00 CDT

Vikas Bajaj contributed reporting from New York

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Drawing on the last option available, OPEC agreed Tuesday to lift any restrictions on its oil sales for the next three months in a move designed to reassure edgy markets about the security of energy supplies even as a new hurricane threatened to cause more havoc in America's energy heartland.

Saudi Arabia, OPEC's largest and most influential member, rallied the group to support its strategy to sell as much oil as consumers asked for. The Organization of Petroleum Exporting Countries pledged all its remaining extra capacity, or an additional two million barrels of oil a day, amounting to 7 percent of the group's output, in a last-ditch attempt to bring prices down from their record highs. Because of shortages in refining capacity in the United States, Ali al-Naimi, Saudi Arabia's oil minister, admitted there might be few takers. But he highlighted the psychological impact. "OPEC went out of its way and offered all the spare capacity that it has, recognizing that maybe there is no demand, but offering it so that consumers can feel comfortable that the supply is there," Naimi said. He added, "If the people don't want the crude, it is better for it to stay underground."

The proposal, agreed upon following two days of talks in Vienna, was overshadowed by reports that a new hurricane was headed towards the Gulf of Mexico, where a third of U.S. output and nearly half its refining capacity is concentrated. The threat of fresh disruption there pushed oil prices up 7 percent Monday in New York. But in trading Tuesday, crude oil for October delivery was down $1.39, or 2 percent, at $66 a barrel, after the latest weather forecast indicated that Hurricane Rita may now be headed for the southern coast of Texas rather than the energy-intensive area just south and east of Houston. The Gulf Coast has yet to recover from Hurricane Katrina, which slammed into the energy hub three weeks ago. In addition, four refineries, amounting to 5 percent of U.S. capacity, will be out of commission until November at the earliest after suffering from flooding caused by the storm. OPEC's decision will remain in place until the group meets again, in December in Kuwait. Naimi said the measure then could be extended.

"If the market needs additional crude, it's there and they're welcome to it," Naimi said. "We have said many times there is no shortage of crude."

Saudi Arabia has about 1.5 million barrels a day of extra capacity on call, and others OPEC producers, like Kuwait, the United Arab Emirates and Nigeria, have an additional 500,000 barrels a day. The group currently produces 28.3 million barrels a day, excluding Iraq, or about a third of world oil production.

Source: International Herald Tribune

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