-->Sept. 26, 2003, 10:29AM

<font color=red>Bush cautions OPEC</font> on output cut. Don't harm U.S. economy, he says
By ADAM ENTOUS
Reuters News Service
WASHINGTON -- One day after OPEC's surprise decision to cut oil supplies, President Bush pressed Saudi Arabia and other cartel members Thursday not to act in ways that threaten the U.S. economy.

The president's unusual message to the Organization of the Petroleum Exporting Countries underscored the administration's concerns about the potential effect of higher energy prices on the nation's fragile economic recovery in the run-up to next year's presidential election.

"My reaction is that I would hope our friends in OPEC don't do things that would hurt our economy," Bush told reporters at the White House when asked about OPEC's decision, which could raise fuel costs this winter.

White House spokesman Scott McClellan said the administration was consulting with OPEC members, which control a third of the world's oil supply, and asserted that"market forces" should set oil prices.

"Oil prices should be determined by market forces so that we can ensure adequate supplies. Producing and consuming countries both have an interest in ample, affordable energy supplies," McClellan said."Obviously, we have ongoing and regular consultations with major oil producers around the world, and those continue."

OPEC agreed Wednesday to reduce production for 10 members by 900,000 barrels per day to 24.5 million barrels per day, effective Nov. 1. It cited rising inventories, this month's fall in prices and the gradual return of Iraqi crude to the market.

World oil prices surged more than a dollar Wednesday after OPEC's decision.

But light, sweet November crude oil futures prices rose only 5 cents Thursday to settle at $28.29 a barrel. There was some skepticism over whether OPEC members will be able to hold to their new production targets.

October gasoline futures rose 1.05 cents to 87.59 cents a gallon. October heating oil settled 0.41 cent lower at 74.11 cents a gallon.

In London, November Brent blend crude oil futures settled up 14 cents, at $26.81 a barrel.

Saudi Arabia has come under heavy criticism in the United States since the 2001 terrorist attacks but won high marks from the Bush administration for opening the pumps before the U.S.-led invasion of Iraq.

High energy prices have emerged as an important election-year issue for Bush, who has seen his approval ratings slide amid growing unrest in Iraq and layoffs at home.

To counter OPEC's output cut, Sen. Charles Schumer, D-N.Y., urged the administration to release crude from the U.S. emergency oil stockpile. He said Bush should tap part of the 621-million-barrel Strategic Petroleum Reserve to put more oil in the market and lower prices.

The administration has said repeatedly it would use the reserve only if there was a real supply emergency and not to control crude prices.

Earlier this month, Bush said he was more concerned about natural gas prices than oil.

On Thursday, natural gas futures fell after the Energy Department reported a record inventory rise. The 100 billion-cubic-foot addition, the largest ever for the third week of September, narrowed the gap between current inventories and the five-year average to 3.3 percent from 4.4 percent a week earlier.

October futures, which expire today, fell 4.6 cents to $4.542 per thousand cubic feet. Gas for November delivery fell 4.9 cents to $4.703 per thousand cubic feet.

Dow Jones News Service and Bloomberg News contributed to this report.


<ul> ~ Houston Chronicle</ul>