A lot of nothing out of the Great Saudi Oil Summit:
bloomberg.com
Saudi Arabia Boosts Oil Supply, May Pump More Later (Update1)
By Ayesha Daya and Glen Carey
June 22 (Bloomberg) -- Saudi Arabia may increase its oil production beyond a planned 200,000 barrel-a-day increase in July if the oil market requires extra supply, Saudi Oil Minister Ali al- Naimi told consumers at a summit in Jeddah.
Saudi Arabia's commitment to government and business leaders to pump 9.7 million barrels a day next month came after crude rose to a record $139.89 in New York on June 16. Saudi King Abdullah said at today's summit that his country, the world's biggest oil exporter, seeks ``reasonable'' prices. OPEC President Chakib Khelil said a Saudi increase is ``illogical'' because refiners don't need more crude.
The International Energy Agency estimates that world oil use this year will climb 800,000 barrels a day, or 1 percent, as demand increases in emerging markets. Stagnating production from Russia and the North Sea and disruptions in Nigeria are also contributing to higher prices, which have touched off strikes, riots and accelerating inflation in nations around the world.
``Saudi Arabia is prepared and willing to produce additional barrels of crude above and beyond the 9.7 million barrels per day, which we plan to produce during the month of July, if demand for such quantities materializes and our customers tell us they are needed,'' Naimi said.
Saudi Arabia's capacity will be 12.5 million barrels a day by the end of 2009 and may rise to 15 million after that if necessary, he said.
Speculators Blamed
The President of the Organization of Petroleum Exporting Countries, Khelil, blamed $135 oil on speculative investors, the subprime credit crisis and geopolitics, rather than a shortage of supply. Khelil, who is also Algeria's oil minister, today dismissed the argument voiced by consuming nations that possible supply shortages are driving up prices.
``The concern over future oil supply is not a new phenomenon,'' he told reporters in Jeddah.
More than 35 countries, seven international organizations and 25 oil companies took part in today's summit in the Saudi Red Sea port, including U.K. Prime Minister Gordon Brown, U.S. Energy Secretary Samuel Bodman and Exxon Mobil Corp. Chief Executive Officer Rex Tillerson.
The Saudi King and other producer-nation officials including Kuwaiti oil minister Mohammed al-Olaim also called for greater regulation on oil market investors. The U.S. Commodity Futures Trading Commission is currently investigating the role of index- fund investors in the doubling of oil prices during the past year.
OPEC Divided
OPEC itself is divided. While Saudi Arabia is boosting output, other OPEC members including Libya, Algeria, Iran, Venezuela and Qatar are opposed to higher production, saying refiners aren't asking for more crude.
Libya's top oil official, Shokri Ghanem, yesterday said his country may have to cut its own production in response to the Saudi move while Kuwait, OPEC's fourth largest producer, said it's ready to join neighboring Saudi Arabia and raise output, if needed.
Oil rose to $139.89 a barrel on June 16 as investors bought commodities to hedge against a weakening U.S. dollar and concern mounted that demand is growing faster than supply. Gasoline retail prices over $4 a gallon in the U.S. are raising concern that the economy may slip into recession. Crude oil for July delivery closed June 20 in New York at $134.62 a barrel.
U.S. Energy Secretary Bodman rejected calls to put greater control on markets, and said a shortage of supply was responsible for high prices. He disputed the view that speculators are leading the markets to record levels.
Spare Capacity
The market needs between 3 million and 4 million barrels a day of spare oil production capacity, compared with the 2 million barrels a day currently available, Bodman said. OPEC says the world's spare capacity is about 3 million barrels a day, with two- thirds of that in Saudi Arabia.
``Market fundamentals show us that production has not kept pace with growing demand for oil resulting in increasing, and increasingly volatile, prices,'' Bodman said in a speech today.
Italy's Minister of Industry Claudio Scajola and Brazil's Energy Minister Edison Lobao were among consumer-nation officials attending the Jeddah summit that said more supply was needed to ease prices. ``We expect Saudi Arabia to open the taps,'' Austrian Economy Minister Martin Bartenstein said in an interview two days ago. ``One third of inflation in the euro zone comes from energy and inflation is now of importance.''
Speaking in Jeddah today, the Austrian minister said: ``We would like to see more oil on the market. That is the only action I can think of that can discourage the speculators.''
Curtailing Demand
Adam Sieminski, chief energy economist at Deutsche Bank AG, and other analysts maintain that consumers will need to curtail demand before prices head lower. The biggest drop in prices in 11 weeks came on June 18, after the world's second-biggest oil consumer, China, raised gasoline, diesel and power prices to rein in energy use.
Saudi Arabia will increase production capacity to 12.5 million barrels a day of oil by the end of next year and could add a further 2.5 million barrels a day if needed, from some new giant fields, Naimi said.
``The Saudi announcement of a possible increase in capacity to 15 million barrels a day is a robust statement; it would be a huge increase,'' ENI SpA Chief Executive Officer Paolo Scaroni said in an interview in Jeddah today. ``The world is worried about the shortage in spare capacity and any improvement will change this sentiment.''
Zuluf, Shaybah Fields
The further daily capacity includes 900,000 barrels from the Zuluf field, 700,000 barrels from Safaniyah, 300,000 barrels from Berri, 300,000 barrels from Khurais and 250,000 barrels from Shaybah, Naimi said.
U.K. Prime Minister Brown said in Jeddah today he will open Britain's energy industry to investment from oil producing nations as a way of keeping a lid on crude prices and paying for measures to clean up the environment. Further talks may be held between producers and consumers later this year in London, he said.
The U.K. is talking to the Abu Dhabi Investment Authority about new investments and with the government of Qatar about a joint energy fund, Brown said. Saudi Arabia agreed today to work on carbon capture and storage facilities valued at 1 billion pounds ($2 billion), and the U.K. government is poised to approve an 800 million-pound offshore wind farm that Norway's state-owned StatoilHydro ASA plans to build, he added.
To contact the reporters on this story: Ayesha Daya in Jeddah adaya1@bloomberg.net Glen Carey in Jeddah gcarey8@bloomberg.net
Last Updated: June 22, 2008 10:16 EDT |
