Saudi backs OPEC increase despite crude surplus

[Yo_Mama_Been_Loggin]

By Peg Mackey and Ghaida Ghantous
Sat Sep 17,12:37 PM ET



VIENNA (Reuters) - 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.

http://news.yahoo.com/s/nm/20050917/bs_nm/energy_opec_naimi_dc

That shouldn't be a problem anymore thanks to the massive tax breaks and relaxation of enviromental standards in *'s energy bill.



:sarcasm:

[Massacure]

1. Saudi Arabia has offered extra crude but it is sour and not sweet.

Most U.S. refineries cannot handle the sulfer content of sour crude.

[mbperrin]

2. Actually, most of the oil on market is heavy (or sour)

and most refineries are set up:
http://www.gasandoil.com/goc/news/ntn44964.htm

<snip>When the price gap widened between sweet and sour crude, US refineries were better able than most to take advantage of the gap. Refineriesalong the Gulf Coast, which account for about half of the country's refinery capacity, are considered the most sophisticated in the world. Venezuela, which is a major producer of heavy sour oil, became partners in some of those refineries to ensure a market for its oil.
"We're probably in a better position than most to handle these heavy oils," said Joanne Shore, an analyst for the Energy Information Administration. In addition, California refineries have been upgraded to handle heavy sour crude, and most of those in the upper Midwest are also thought to be capable of handling heavy sour crude.

Another indication of the country's increasing use of lower-quality crude oil is that the Strategic Petroleum Reserve, which is meant to help the United States in case of a major disruption in oil supplies, is two-thirds sour crude and one-third sweet crude.

<more>
I'll add my two cents worth if it's OK:
The real truth is, oligopoly behavior allows the companies to control price at the refining bottleneck, which, because gasoline is inelastic in its price behavior(that is, does not respond at the same rate in usage as price increases), they make far more by NOT expanding refining capacity. With the price maker-price taker paradigm for oligopolistic behavior, they have no worries about others stepping out of line.

In other words, even if we give the land away and take away all enviromental restrictions, no new refineries will be built. The industry make more by restriction than they could hope to add through expansion.

[Massacure]

3. Interesting. I stand corrected.

[Thor_MN]

4. And what company wants to build the world's last new refinery?

It takes some time for the equipment to turn a profit... Might they be worried that their won't be enough crude to refine? Just a thought....

[Wrinkle_In_Time]

5. If this was posted...

... on FARK it would have the tag.