OPEC Moves To Ease Oil Fears

OPEC logo on a oil barrel with an oil rig in the background
AP / CBS
OPEC agreed Tuesday to make 2 million extra barrels of oil a day available in an effort to reassure markets edgy over supplies for the winter and storms threatening refineries along the U.S. Gulf Coast.

The Organization of Petroleum Exporting Countries said it would offer the extra oil for three months starting Oct. 1, but that its output ceiling would remain unchanged at 28 million barrels a day.

"We want to show everybody that we have the ability to provide oil in the future," said OPEC President Sheik Ahmed Fahd Al Ahmed Al Sabah, who is also Kuwait's oil minister. He said the 2 million extra barrels represented the group's entire spare capacity.

"We hope that this will reflect positively on prices," Sheik Ahmed added. "We are very keen to help the market. We know there are geopolitical and weather crises."

Tuesday's offer came as Tropical Storm Rita strengthened into a hurricane as it lashed the Florida Keys, threatening to inflict fresh damage on oil production facilities on the Gulf of Mexico coastline.

Oil ministers decided against raising the output quota by 500,000 barrels a day. But both steps were seen as largely symbolic: The cartel already is pumping about 28.5 million barrels a day, and making extra crude available will not change the fact that the world's refineries can't keep up with demand.

OPEC's decision was overshadowed by Rita, which posed a fresh threat just weeks after Hurricane Katrina forced some U.S. refineries to shut down or scale back operations.

Oil prices fell more than $1 a barrel Tuesday after jumping more than $4 a barrel Monday in the biggest one-day price jump ever. Light, sweet crude for October delivery fell to $1.39 to $66.00 a barrel in morning trading on the New York Mercantile Exchange.

Most of the 2 million extra barrels will come from Saudi Arabia, the only country able to produce significant amounts of additional crude, although OPEC said all members would contribute.

Saudi Oil Minister Ali Naimi said he thought OPEC's offer would reassure the oil markets.

"It is an excellent gesture from OPEC to provide 2 million barrels a day of spare capacity to the market," Naimi said. "If the market feels it needs additional crude, they're welcome to it. It's there."

The European Union had asked OPEC on Tuesday to provide the extra barrels.

"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.