Leading OPEC producer Saudi Arabia on Saturday said it will back an increase in cartel output limits next week even though it is struggling to sell additional crude.
"Absolutely, yes," Saudi Oil Minister Ali al-Naimi said of Riyadh's support for raising OPEC's 28-million barrel a day output ceiling. "Absolutely not," was his assessment of the need for more crude on the world market. "I've offered up to 11 million (barrels a day) but we have had no response whatsoever."
The Organization of the Petroleum Exporting Countries starts a 2-day meeting on Monday and is expected to lift supply to quell demands from importing nations aghast at prices over $60 a barrel.
But OPEC's analysis, backed by industry experts, is that world crude supplies are ample. Refinery bottlenecks in consuming nations are the problem.
"You know better than I where the constraints are, they are not on the supply side on crude oil, the constraints are in the downstream and Katrina damaged some of the infrastructure," said Naimi.
Hurricane Katrina's assault on U.S. Gulf refineries has caused a refining crisis with 880,000 barrels a day, about a tenth of U.S. plant, out of action in the world's biggest consumer.
The slowing of global fuel demand growth resulting from highs prices mean it is in OPEC's interest to push prices down further from Friday's $63 close for U.S. crude.
Riyadh has already scouted refiners to sell more of its crude in October, but its incremental high-density, high-sulfur crude, difficult to process into transport fuel, has found no takers. The only option left for its least popular grades would be to discount prices more heavily.
"We price to be competitive in the market, we don't price to increase demand," said Naimi.
Now pumping at 9.5 million bpd, Naimi said Riyadh was prepared to go to full capacity of 11 million bpd, implying support for an OPEC increase of as much as 1.5 million.
"I already offered 11 million from Saudi Arabia which means I am willing to support whatever number up to that level," he said. Given OPEC's struggle to sell more, most bets are on a token 500,000 bpd, taking OPEC to 28.5 million, plus the 2 million pumped by Iraq which is exempt from cartel quotas.
"We're going to need to make a gesture after Katrina, probably with 500,000 barrels a day," said an OPEC delegate, washingtonpost.com reported.