IEA chief: OPEC doesn’t have 2M bpd

OPEC is offering more oil to the market that some say it doesn’t have; refining capacity continues to be worrisome

Petroleum News

Although the Organization of Petroleum Exporting Countries decided against raising its output quota by 500,000 barrels a day, on Sept. 20 OPEC offered world markets an extra 2 million barrels of oil a day — its entire spare capacity — in an attempt to show that supply fears were unfounded even with traders eyeing another hurricane approaching the Gulf of Mexico.

But Claude Mandil, head of the International Energy Agency, questioned the cartel’s ability to make good on its offer, saying OPEC could make more crude available, but only between 1 million and 1.5 million barrels per day.

OPEC, which has come under international pressure over the near-record prices that followed Hurricane Katrina, said its output ceiling would remain at 28 million barrels a day, stressing that the main obstacle 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,” OPEC President Sheik Ahmed Fahd Al Ahmed Al Sabah said. The 2 million barrels, representing all the spare capacity of the Organization of Petroleum Exporting Countries, would be available for three months beginning Oct. 1, he said.

According to a Dow Jones Newswires report, Mandil also said that any extra OPEC production will be sour, heavy crude oil that is harder to refine.

Mandil described the cartel’s decision as a “very limited” gesture, but said it will still be seen as a positive move by the market.

European Union also has doubts

“It’s just a small step ... I don’t think it’s going to be enough to bring the oil price down,” Rupert Krietemeyer, spokesman for EU Energy Commissioner Andris Piebalgs, said in Brussels, Belgium.

Analysts have said that the lack of refining capacity, as well as a surge in demand last year and unrest in producing countries such as Iraq have left OPEC’s hands tied.

“It’s tough to blame (OPEC) for higher oil prices. I think they’re doing what they can,” said Jason Schenker, an economist with U.S.-based Wachovia Corp.

Daukoru says second period of concern

Nigerian Oil Minister Edmund Daukoru, tapped to take over as OPEC president on Jan. 1, dismissed a higher output ceiling as a meaningless “gimmick,” and insisted that offering an extra 2 million barrels a day was “a much more pragmatic approach.”

He said he considered it unlikely that the 2 million barrels would be needed and that OPEC was worried about a possible glut of crude in the second quarter of 2006 after winter demand subsides. “That’s the period we have to watch,” he said.

More refineries needed

“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.”

Sheik Ahmed also rejected comments by Britain’s Treasury chief Gordon Brown, who effectively blamed producers for soaring oil prices, saying the rise in gasoline prices was due to high taxes on byproducts.

“I hope Mr. Brown takes the price of oil and gives us the taxes. This is not OPEC’s fault, it’s the taxes,” he said.

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.

OPEC said it adopted a long-term strategy plan designed to deal with most market conditions through 2020, which calls for fair and stable prices for producers and consumers, stability of world oil markets and secure global oil demand.

“We want to show everybody that we have the ability to provide oil in the future,” Sheik Ahmed said.

OPEC’s next meeting will be Dec. 12 in Kuwait.

—The Associated Press contributed to this report