Qatari Oil Minister Abdullah bin Hamad al-Attiyah warned yesterday that OPEC shouldn't raise production just for "increase's sake," saying there were indications that oil prices were decreasing because of low demand.
Ministers from the Organization of Petroleum Exporting Countries meet today in Vienna to discuss ways of stabilizing the market after Hurricane Katrina drove prices to new highs -- including possibly raising the group's production ceiling by 2 percent.
The group is widely expected to increase the production ceiling by 500,000 barrels a day.
But previous OPEC moves have done little to ease market fears over supply, and any increase is widely regarded as meaningless because it merely sanctions existing production.
Saudi Arabian Oil Minister Ali Naimi has said he supports a ceiling hike, but that he also did not see demand for more crude. He did not specify the size of the increase.
"We'll listen to the Saudi proposal but we shouldn't increase just for increase's sake," al-Attiyah said yesterday in Doha, Qatar.
Al-Attiyah said the problems with US refineries being offline since Katrina hit were temporary, but the capacity "will take a few months to get back to full production."
"If there's no demand, how will that affect prices?" he said.
OPEC President Sheik Ahmed Fahd Al Ahmed Al Sabah said in comments published yesterday that he supported an increase in production quotas, despite fears about a glut.
"There are fears in the oil markets of supplying the markets with crude despite the existence of a large surplus," he said in remarks published by the Kuwaiti daily Al-Rai Al-Aam.
"There are quantities that the markets can't absorb and that don't have a buyer," said Al Sabah, who is also Kuwait's oil minister.
However, he reiterated that OPEC will try to stabilize prices.
"We will do whatever we can at this meeting, including suggesting a 500,000 barrel-a-day increase," he said.
With oil prices about 50 percent higher than a year ago and motorists feeling the increase at the gas pump, the ministers have repeatedly said that OPEC is concerned and are doing all they can to keep the market well-supplied and prices stable.
But concern that high prices have weakened oil demand has dampened prices, which had soared above US$70 a barrel on concern about production outages caused by Hurricane Katrina, instability in Iraq and the upcoming winter season.
Prices hit their lowest levels in five weeks on Friday, with light, sweet crude for October closing at US$63 on the New York Mercantile Exchange, which is the lowest settlement price since Aug. 5.
Gasoline closed at US$1.7851 a gallon, the lowest close since Aug. 3.
Backwash of crude
There appears to be increasing volumes of unsold heavy, sour crude that the US doesn't need, creating a dilemma for OPEC -- the group must appear to be doing all it can to alleviate the pain consumers are feeling, while risking sharper crude price declines from the backwash of crude caused in part by Katrina.
Adding to the international pressure on OPEC, the European Commission said that European Energy Commissioner Andris Piebalgs was to meet Al Sabah yesterday to discuss high oil prices and their effects on the European economy.
Katrina slammed into the US Gulf Coast, a major oil production hub, at a time when producers worldwide were already struggling to cope.