Oil prices bounced back above $67 today, whipped up by hurricane fears which outweighed OPEC's decision to offer all its spare capacity to the market in an attempt to control surging prices.
US crude for the new front-month November contract rose $1.30 to $67.50 a barrel, recouping most of yesterday 's near 2 per cent fall, as Hurricane Rita lashed the low-lying islands of the Florida Keys and gathered strength approaching the main US production facilities in the Gulf of Mexico.
The October contract expired at $66.23 a barrel on Tuesday, down $1.16 after leaping more than $4 the day before. London Brent crude was up $1.15 to $65.35 a barrel in Asian trade.
Meteorologists said Rita could become a Category 4 storm, the second-highest grade on the five-stage hurricane scale and equivalent in force to Katrina, which devastated the Gulf Coast three weeks ago and forced oil prices to records above $70.
With Rita's path suggesting landfall over Texas by the weekend, traders focused on her potential to shut facilities unaffected by Katrina, and notably refining capacity, which remains stretched with four refineries still offline.
With the latest hurricane effectively halting efforts to restore 58.5 per cent of US Gulf oil production closed by Katrina, OPEC's offer of its entire 2 million barrels of spare capacity could only dampen prices for a matter of hours.
After pressure from European Union finance ministers OPEC members closed a two-day meeting in Vienna yesterday with an agreement to effectively suspend output quotas and offer all its 2 million barrels per day (bpd) of spare capacity to customers.
The deal applies from October 1st for three months. Non-OPEC member Mexico also pledged to maximise production in response to the current market climate. But most analysts are sceptical that such efforts can have an impact given the fundamental constraints lie in refined oil products rather than crude itself, with attention focused on Rita's potential damage to refineries.