“The supply is here, inventories are building, there is certainly no shortage of supply – so build, build refineries, al-Naimi told reporters.
“Start building refineries and you will solve maybe half of the problem,” he added during his traditional morning jog in Vienna, ahead of a meeting of the Organisation of Petroleum Exporting Countries due on Wednesday.
Industrialised countries have been pressing members of the cartel to raise their production ceiling for crude oil by half a million barrels per day (bpd) to 28 million bpd.
But real crude output is already far higher and in some instance running at full capacity, according to ministers and analysts.
OPEC ministers arriving in the Austrian capital have cautioned that while they are broadly ready to raise their collective production quota for crude, it would have little effect on prices.
The cartel’s president, Kuwait‘s Ahmad Fahd al-Sabah and counterparts from Algeria, Libya and Nigeria signalled they were ready to support the move championed by Saudi Arabia, the world’s largest oil producer and widely regarded as the most influential member of the cartel.
Higher consumption is expected
“We are already producing that actually, now we are over 28 (million bpd) … but at least this will give a good signal to the market,” al-Sabah said early on Tuesday.
An increase now could be a “first stage” towards the fourth quarter when demand is traditionally expected to increase with the onset of winter in the northern hemisphere and higher energy consumption, he added.
But Libya‘s energy chief Fathi Ben Shatwan echoed a widely held view that the move would be a purely “psychological” gesture.
Al-Naimi dubbed the likely increase of 500,000 bpd “reasonable”, and insisted on Tuesday that the market “should be comfortable today with the current supply”.
Oil prices had shot up by $2 a barrel on Monday above the $55-mark amid continuing supply fears, partly fuelled by China’s growing economy, and low-running concern that high oil prices are undermining global economic growth.
They later eased in Asian trading.
“The world will be more comfortable with prices below 50 dollars,” al-Naimi said, echoing earlier comments by his Iranian counterpart Bijan Namdar Zangeneh.
“We have been trying for some time,” the Saudi Arabian official added.
“The world will be more comfortable with prices below $50”
He indicated that Saudi Arabia was ready to boost its own production from 9.5 bpd.
“If we have customers, we can put 11 million bpd now,” the oil chief added.
But he placed great emphasis on bottlenecks caused by inadequate refinery capacity in consumer countries, pointing out that little or no investment in new refinery plants had been made for about 20 years.
“We have to convince the governments to build refineries in the United States and elsewhere,” al-Naimi told reporters.”Everybody is late in building refineries.”
Al-Naimi also said that if Saudi Arabia boosted its oil output, it would be able to bring only more medium and heavy crude onto the market.
Those are exactly the types of oil for which refinery capacity is lacking to turn them into consumer petroleum products such as petrol or heating oil, officials pointed out.
OPEC will boost its real output to 30.5 or 31 million bpd during the fourth quarter, juts above current levels of almost 30 million bpd, al-Sabah said.
Demand traditionally rises sharply during the winter months in the northern hemisphere, placing greater pressure on supply and prodding prices upwards.
Over the past year that trend has been amplified by China‘s roaring industrial and consumer growth.