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The New York Times: EC Set to Open Oil Taps Full Blast: Royal Dutch Shell, Chevron and other oil companies said they were evacuating some employees from offshore oil platforms in anticipation of Tropical Storm Rita. The National Hurricane Center said Monday that the storm was making its way toward the Gulf of Mexico from the Bahamas and could become a hurricane overnight.": Tuesday 20 Sept 2005

Mark H. Milstein/Bloomberg News

Reporters clustered in Vienna on Monday to hear the Saudi Arabian oil minister, Ali al-Naimi, as he discussed OPEC's production proposal.

By JAD MOUAWAD

Published: September 20, 2005

VIENNA, Sept. 19 - OPEC delegates said Monday that the group planned to allow its members to provide up to two million barrels a day of additional crude oil if the market needs it. But oil traders brushed aside the move and instead sent oil prices higher on worries of another possible hurricane.

Forum: Energy

Royal Dutch Shell, Chevron and other oil companies said they were evacuating some employees from offshore oil platforms in anticipation of Tropical Storm Rita. The National Hurricane Center said Monday that the storm was making its way toward the Gulf of Mexico from the Bahamas and could become a hurricane overnight.

The latest hurricane warnings helped push oil prices up on the New York Mercantile Exchange, and they closed Monday at $67.39 a barrel, up $4.39. Natural gas futures hit a record on Monday, closing at $12.663 per thousand cubic feet, up $1.519.

Forecasters issued a hurricane warning for parts of Southern Florida and said that by early Saturday, Rita, the 17th named storm of the Atlantic season, could make landfall near Houston, an area that is a major port and home to many refineries and petrochemical plants.

The mayor of Galveston, Tex., Lyda Ann Thomas, called for a voluntary evacuation. Galveston is an island city and tourist destination about 50 miles southeast of Houston.

OPEC's 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 in Vienna. Some oil ministers said the Organization of the Petroleum Exporting Countries wanted to show it was doing all it could to lower oil prices even as they blamed refining shortages for the current situation.

Under the proposal, which members have been discussing in meetings since Sunday, OPEC producers would provide as much oil as refiners and other buyers asked for, without regard to previous production limits or quotas. The production ceiling, now 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 and OPEC's most influential voice, 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 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.

President Bush said he welcomed a release of more oil by OPEC members, particularly if it helped cut retail gas 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."

OPEC's proposal is largely shaped around an earlier pledge by Saudi Arabia to fully open its taps to consumers who asked for more oil.

Saudi Arabia's commitment to increase its output to its full capacity of 11 million barrels a day, from 9.5 million barrels now, was repeated after Hurricane Katrina interrupted oil production from the Gulf of Mexico three weeks ago, sending the price of crude oil above $70 a barrel.

But the divergence between the oil market's focus and OPEC's plans illustrates the group's dilemma.

"OPEC's move today is largely for show," said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation. "They want to appear to be responsible, but the tools that they have in the bag render them largely impotent for the moment."

Many delegates here have asserted repeatedly that the shortfall in energy markets was not one of crude oil but of refining capacity - the current inability of refiners to turn oil into sufficient gasoline and other products like diesel or jet fuel.

"There is no issue with crude oil supplies," said Abdullah bin Hamad al-Attiyah, the 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 send a message to oil traders, who have been bidding up oil prices over the last two years, largely on the belief that the growth in demand was outstripping the ability of suppliers to bring more oil into the market. That has contributed to a doubling in oil prices over the last two years.

OPEC has been facing mounting criticism from consuming nations, especially in Europe, which has been asking OPEC to act more forcefully, regardless of the refining constraints. Many of those nations are beginning to worry that high oil prices may slow growth and hurt the global economy.

According to OPEC's most recent statistics, the group pumps 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 10 percent to make up for a 5 percent rise in global oil demand. That increase leaves only one OPEC member, Saudi Arabia, with large amounts of untapped oil. Sheik Ahmad, the OPEC president, said that Nigeria, the United Arab Emirates and Libya could provide an extra 400,000 barrels a day by December.

At their meeting on Monday, OPEC's ministers also discussed their long-term strategy and the idea of making their future investment plans clearer. The group appears to have dropped a suggestion to raise the production ceiling by 500,000 barrels a day, an idea that was 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 here 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."

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 of four major refineries along the Gulf of Mexico. 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.

Chevron said Monday that a large refinery damaged by Hurricane Katrina in Pascagoula, Miss., would not be fully operational until mid-November. Under normal operations, the plant, which accounts for about 2 percent of the nation's capacity, processes 325,000 barrels of crude oil a day, the largest amount from the four refineries that are still recovering from Katrina damage.

The refining crunch in the United States caused gasoline supplies to dip, led to spot shortages in some parts of the country and, for a brief period, 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 been reluctant to do.

The International Energy Agency, which usually provides advice on energy policies to 26 industrialized nations, also activated its emergency oil plan, releasing oil for only the second time in its 29-year history.

Vikas Bajaj contributed reporting from New York for this article.