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Last Updated: Tuesday, 20 September 2005, 23:38 GMT 00:38 UK
Oil prices dip despite storm fear
Opec ministers facing the media on Monday
Opec members' actions may have little impact on the market
Oil prices have dipped after Monday's 7% surge, but fears of another storm in the US are overshadowing moves by Opec nations to ease supply worries.

US light sweet crude fell by $1.07 to $67.30 a barrel in New York after rising $4.39 on Monday - the largest single-day rise since December 2001.

London Brent crude also fell, losing $1.41 to trade at $64.20.

Opec ministers are meeting in Vienna amid concern that Tropical Storm Rita may deal another blow to US production.

In an effort to cool prices, the ministers agreed to release an extra 2 million barrels of oil a day into the market should they be needed.

The offer will run for three months from 1 October but Opec said it is not changing its official production limit of 28 million barrels per day.

However, analysts are sceptical whether the extra supplies will do much to restrain soaring prices.

If Rita comes to the Gulf of Mexico and disrupts supply, then we have a problem
Tetsu Emori, Mitsui Bussan Futures

Traders fear further disruption to US production in the Gulf of Mexico region as Rita heads for the Florida coast.

Oil prices are 45% higher than a year ago, although they remain below the record high of $70.85 reached in the immediate aftermath of Hurricane Katrina.

Staff evacuated

Monday's price spike came after several oil producers evacuated staff from Gulf coast rigs, in case Rita passed through the area.

"Everyone's just looking at Rita," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo.

Chevron oil refinery in Pascagoula, Mississippi, flooded out by Hurricane Katrina
Prices have remained high since Katrina put refineries out of action

"It's more psychological right now but if Rita comes to the Gulf of Mexico and disrupts supply, then we have a problem."

Opec has warned that it is willing to help ease prices, but will not hurt its markets by creating an oil surplus.

While some member countries, such as Venezuela, back an increase in output they have voiced doubts about whether extra production will ease high fuel prices, arguing that the main problem is a lack of refining capacity.

Market forces

The Center for Global Energy Studies said in a report that any Opec action was unlikely to substantially reduce prices.

"It is difficult to see any changes on the supply side that would bring the present period of high prices to an end in the short term," it said.

"Opec's spare capacity has dropped to 2 million barrels per day, but much of that outside of Saudi Arabia remains of questionable usefulness."

It echoed comments by the International Monetary Fund (IMF), which has warned that global investment in production and refining capacity will not be sufficient to stop prices rising further over the next five years.

In a draft of its World Economic Outlook due to be published on Wednesday, the IMF is expected to say output is unlikely to outpace global oil consumption over the period.

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