OPEC approves spare capacity deal

Pact leaves output quotas untouched, opens up 2 million barrels of oil reserves to buyers.

September 20, 2005: 10:00 AM EDT

VIENNA (Reuters) - OPEC agreed to a deal Tuesday making available its remaining spare production capacity in a bid to reassure consumer countries about energy supply security, Venezuelan Oil Minister Rafael Ramirez said.

The agreement means the 11-member Organization of the Petroleum Exporting Countries is putting its 2 million barrels a day of spare crude on offer to world markets.

The offer applies from Oct. 1 for three months.

The pact leaves the group's official output limit unchanged at 28 million bpd because ministers say there is no demand now from refiners for extra cartel crude.

Most in the Organization of Petroleum Exporting Countries had favored the offer that would leave official output quotas unchanged.

"I believe that most members will go for the 2 million," OPEC President Sheikh Ahmad al-Fahd al-Sabah told reporters before a meeting to decide policy.

An OPEC source told Reuters earlier that Iran was seeking conditions on that deal because it did not want to give Saudi Arabia, holder of most spare capacity, a mandate to produce at will.

Acting Iranian Oil Minister Kazem Vaziri wanted new ministerial consultations before any actual output is released, the source said.

Sheikh Ahmad said a second option was being considered that would have increased output quotas by 500,000 bpd to 28.5 million bpd, with another 500,000 bpd possible later at his discretion.

Several ministers said previously that they were opposed to higher output limits when global refining capacity is at full stretch and unable to process more crude.

There appears little the 11-member group can do to control oil prices, which were blown higher again Monday by the threat of a tropical storm heading for U.S. Gulf oil facilities.

U.S. crude shot up more than $4 a barrel Monday, easing back 96 cents early Tuesday to $66.43 as dealers feared a further setback to the U.S. energy industry after Hurricane Katrina.

OPEC has come under pressure from European Union finance ministers to immediately push more crude into a market where refinery bottlenecks are limiting processing capability for transport fuels.

The cartel drew support Monday from the United States, where a senior U.S. government analyst said producers would find it difficult to place more oil because crude inventories were already sufficient.

"The market feels fairly comfortable with the crude it has at these prices," said Doug MacIntyre, analyst with the Energy Information Administration. "It's difficult for me to envision (the OPEC offer) having too much of an impact. Crude inventories here in the U.S. are looking pretty good."