Saudi bid to boost oil output fails

OPEC ministers have failed to support a proposal by Saudi Arabia on raising oil output to reduce surging prices, with the cartel putting off a decision until its next official meeting in June.

    Al-Naimi (L) sent oil prices sliding with his proposal

    Saudi Arabia was responding to the worries of governments and

    consumers about surging oil prices with its proposal to raise output

    but its move did not win immediate support from other OPEC

    countries.

    Flexing its muscles as the world's biggest oil producer, the

    kingdom proposed to boost OPEC production by more than 2.0 million

    barrels a day, provoking a mixed reaction from within the cartel.

    The ministers from the Organisation of Petroleum Exporting

    Countries (OPEC) were meeting in Amsterdam on Saturday for an

    informal meeting

    in the sidelines of a world energy summit amid mounting calls for

    urgent action to bring down oil prices.

    "The decision will be made in Beirut," said OPEC President

    Purnomo Yusgiantoro, referring to the cartel's next official meeting

    in the Lebanese capital on 3 June.

    Oil price rise

    Yusgiantoro, who is also Indonesia's energy minister, told

    reporters the OPEC ministers were "deeply concerned" by the

    sharp rise in the price of oil.

    Despite such concerns, the other OPEC members made clear that

    they were not prepared to make an official decision to raise

    production in an informal setting.

    Some countries seemed annoyed at the fait acompli put to them by

    Saudi Arabia, the cartel's most influential member.

    "It (the Saudi proposal) is a good step. Will it be enough to change the

    anticipations of the market and to introduce a real clear price

    reduction? We need more than $1, which was the reaction of

    the market"

    Claude Mandil,
    Head of The International Energy Agency

    On Friday, the proposal from the kingdom's Oil Minister Ali

    al-Naimi to raise production sent oil prices sliding on global

    markets even though some people voiced surprise the reaction was not

    stronger still.

    New York's benchmark contract, light sweet crude for delivery in

    July, fell nearly $1, dropping below the psychologically

    important $40 level.

    While the Saudi offer did not win immediate support from the

    rest of OPEC, Naimi stood firm by his proposal.

    Global economic recovery

    "Never doubt what Saudi Arabia says," he told journalists.

    Big oil consuming countries have been pressuring OPEC in the

    run-up to the meeting to make more crude available to markets so

    that the price of oil does not thwart the fragile global economic

    recovery.

    OPEC president Yusgiantoro said the ministers examined the

    proposals from Riyadh "in line with OPEC's commitment to do whatever

    we can to ensure market stability and to ensure adequate supply to

    support world economic growth".

    According to the cartel the current high crude oil price regime is the

    result of a combination of several factors such as gasoline

    bottlenecks and increased tensions in the Middle East and Iraq.

    "Never doubt what Saudi Arabia says"

    Ali al-Naimi,
    Saudi oil minister

    International Energy Agency head Claude Mandil, whose

    organisation represents the interests of big oil consuming nations,

    gave a cautious response to the Saudi proposal.

    "It is a good step. Will it be enough to change the

    anticipations of the market and to introduce a real clear price

    reduction? We need more than $1, which was the reaction of

    the market."

    Oil supply

    Dutch Economic Affiars minister Laurens Jan Brinkhost, who was

    hosting the International Energy Forum

    , hailed Saudi Arabia's proposal.

    "It is a recognition that supply matters," he said.

    Part of the Saudi proposal was also for the kingdom alone to

    provide 9.0 million barrels per day to its customers from June.

    Saudi Arabia has an OPEC quota of about 7.6 million bpd but is

    believed to be exceeding this.

    On Saturday the minister said his country had a production

    capacity of 10.5 million bpd.

    SOURCE: AFP


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