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06-21-2008, 07:41 PM
Saudi Arabia Will Raise Oil Output 2% in July to Curb Prices
By Maher Chmaytelli and Ayesha Daya
June 22 (Bloomberg) -- Saudi Arabia, which convenes a meeting of government and business leaders today to discuss world energy markets, said it will raise its oil production by 2 percent in July in a bid to curb record prices.
Production will increase by 200,000 barrels a day to 9.7 million barrels starting in July, Saudi Oil Minister Ali al- Naimi told reporters in Jeddah, Saudi Arabia, yesterday. State- owned Saudi Aramco will soon add 500,000 barrels, or 4.6 percent, to the kingdom's total capacity with its Khursaniyah field.
Oil doubled in the past year, touching a record $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. The advent of $4 a gallon gasoline in the U.S. sparked concern the economy may slip into recession.
``It is the policy of Saudi Arabia to satisfy the market need when there is a need,'' said Prince Abdulaziz Bin Salman, the kingdom's deputy oil minister. Salman warned that more production may not lower prices because he said the increased prices have been caused by speculators, a stand that is disputed by consuming nations.
``It's not about quick fixes,'' he told reporters. ``The measure of success of the meeting should not be whether it will make prices go down the day after tomorrow.''
OPEC members including Libya, Algeria, Iran and Venezuela are opposed to increasing production. Libya's top oil official, Shokri Ghanem, yesterday said his country may have to cut its own production in response to the Saudi move.
`Plenty of Oil'
``We don't see any need for more oil,'' Ghanem told reporters in Jeddah. ``There is plenty of oil in the market.''
World oil use this year will climb 800,000 barrels a day, or 1 percent, as demand increases in emerging markets, the International Energy Agency estimates. Stagnating production from Russia and the North Sea are also contributing to higher prices, which have touched off strikes, riots and accelerating inflation around the world.
``A tight market,'' is driving prices up, U.S. Energy Secretary Samuel Bodman told reporters in Jeddah, rejecting the argument made by producers that speculators are to blame.
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.
The Organization of Petroleum Exporting Countries says it has 3 million barrels a day of spare capacity. The kingdom has 2 million barrels a day of spare capacity, a Saudi official told reporters, with the rest divided among other members. The 13- member group supplies 40 percent of the world's oil.
`Huge Profit'
Investment funds and traders made ``huge profit'' over the past two years by speculating on oil, Ibrahim Muhanna, an adviser to the Saudi oil minister, said in comments published in Asharq al-Awsat newspaper. Investors are buying and selling crude futures to make up for losses suffered in the U.S. sub- prime mortgage crisis, and as a hedge against inflation caused by the depreciation of the dollar, he said.
``It's one of the most important reasons for the crazy increase in price,'' Muhanna said. ``There is a balance in supply and demand, stockpiles are at their five-year average.''
Saudi Arabia, OPEC and the IEA, which advises 27 oil importing nations on energy policy, agreed on a draft document to be discussed by the summit, bin Salman said. The draft outlines causes of price fluctuations and suggests ways to ensure stability.
Gathering Data
The draft provides for ``gathering more data about the activity of index funds that are assessing oil futures artificially,'' according to a draft in Arabic of the document shown to Bloomberg by an OPEC delegation in Jeddah and confirmed by a European Union participant.
The draft calls for increased investments in oil production and refining, and strengthening dialogue between consumers and producers on oil demand and stockpiles, he said.
The EU will seek at the meeting to have a commitment from Saudi Arabia that it would continue ramping up production after July, said a European minister who declined to be named ahead of the summit.
Saudi Arabia said in May it would increase production by 300,000 barrels a day this month in response to requests from consumers. The announcement came during a visit by U.S. President George W. Bush.
Indonesia, which last month said it may quit OPEC because of falling production, would like to see lower oil prices, Oil Minister Purnomo Yusgiantoro said.
More than 35 countries, seven international organizations and 25 oil companies and are scheduled to take part in the one- day summit to be chaired by Saudi's King Abdullah.
Link:http://www.bloomberg.com/apps/news?pid=20601087&sid=aLwzvHrIZcos&refer=home#
By Maher Chmaytelli and Ayesha Daya
June 22 (Bloomberg) -- Saudi Arabia, which convenes a meeting of government and business leaders today to discuss world energy markets, said it will raise its oil production by 2 percent in July in a bid to curb record prices.
Production will increase by 200,000 barrels a day to 9.7 million barrels starting in July, Saudi Oil Minister Ali al- Naimi told reporters in Jeddah, Saudi Arabia, yesterday. State- owned Saudi Aramco will soon add 500,000 barrels, or 4.6 percent, to the kingdom's total capacity with its Khursaniyah field.
Oil doubled in the past year, touching a record $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. The advent of $4 a gallon gasoline in the U.S. sparked concern the economy may slip into recession.
``It is the policy of Saudi Arabia to satisfy the market need when there is a need,'' said Prince Abdulaziz Bin Salman, the kingdom's deputy oil minister. Salman warned that more production may not lower prices because he said the increased prices have been caused by speculators, a stand that is disputed by consuming nations.
``It's not about quick fixes,'' he told reporters. ``The measure of success of the meeting should not be whether it will make prices go down the day after tomorrow.''
OPEC members including Libya, Algeria, Iran and Venezuela are opposed to increasing production. Libya's top oil official, Shokri Ghanem, yesterday said his country may have to cut its own production in response to the Saudi move.
`Plenty of Oil'
``We don't see any need for more oil,'' Ghanem told reporters in Jeddah. ``There is plenty of oil in the market.''
World oil use this year will climb 800,000 barrels a day, or 1 percent, as demand increases in emerging markets, the International Energy Agency estimates. Stagnating production from Russia and the North Sea are also contributing to higher prices, which have touched off strikes, riots and accelerating inflation around the world.
``A tight market,'' is driving prices up, U.S. Energy Secretary Samuel Bodman told reporters in Jeddah, rejecting the argument made by producers that speculators are to blame.
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.
The Organization of Petroleum Exporting Countries says it has 3 million barrels a day of spare capacity. The kingdom has 2 million barrels a day of spare capacity, a Saudi official told reporters, with the rest divided among other members. The 13- member group supplies 40 percent of the world's oil.
`Huge Profit'
Investment funds and traders made ``huge profit'' over the past two years by speculating on oil, Ibrahim Muhanna, an adviser to the Saudi oil minister, said in comments published in Asharq al-Awsat newspaper. Investors are buying and selling crude futures to make up for losses suffered in the U.S. sub- prime mortgage crisis, and as a hedge against inflation caused by the depreciation of the dollar, he said.
``It's one of the most important reasons for the crazy increase in price,'' Muhanna said. ``There is a balance in supply and demand, stockpiles are at their five-year average.''
Saudi Arabia, OPEC and the IEA, which advises 27 oil importing nations on energy policy, agreed on a draft document to be discussed by the summit, bin Salman said. The draft outlines causes of price fluctuations and suggests ways to ensure stability.
Gathering Data
The draft provides for ``gathering more data about the activity of index funds that are assessing oil futures artificially,'' according to a draft in Arabic of the document shown to Bloomberg by an OPEC delegation in Jeddah and confirmed by a European Union participant.
The draft calls for increased investments in oil production and refining, and strengthening dialogue between consumers and producers on oil demand and stockpiles, he said.
The EU will seek at the meeting to have a commitment from Saudi Arabia that it would continue ramping up production after July, said a European minister who declined to be named ahead of the summit.
Saudi Arabia said in May it would increase production by 300,000 barrels a day this month in response to requests from consumers. The announcement came during a visit by U.S. President George W. Bush.
Indonesia, which last month said it may quit OPEC because of falling production, would like to see lower oil prices, Oil Minister Purnomo Yusgiantoro said.
More than 35 countries, seven international organizations and 25 oil companies and are scheduled to take part in the one- day summit to be chaired by Saudi's King Abdullah.
Link:http://www.bloomberg.com/apps/news?pid=20601087&sid=aLwzvHrIZcos&refer=home#