Saudi pumps out oil to suck down prices
Saudi Arabia is taking action to reduce the price of oil by pumping about 10 million barrels a day of crude and will produce more if customers demand it, a Gulf Cooperation Council (GCC) official with knowledge of the matter said.
The ideal price of crude for Organisation of Petroleum Exporting Countries (Opec) is $100 a barrel and current prices are not supported by the fundamentals, the official said, declining to be identified because he's not authorised to speak publicly.
The oil market is well balanced and commercial inventories are growing as more supply comes on stream in coming months, while demand is slowing and growth won't exceed 800,000 barrels a day in 2013, the official said.
Saudi Arabia, the world's largest crude exporter, is producing near the highest level in more than three decades. Its output has boosted supply from the Organisation of Petroleum Exporting Countries to 1.63 million barrels a day more than the amount the world needs this year, data from the group showed in its most recent monthly report released on September 11.
Oil Minister Ali Al Naimi said on September 10 that global supply, demand and inventories don't justify the current increase in crude prices. The desert kingdom has worked with the UAE and Kuwait, fellow members of the six-nation Gulf Cooperation Council, to raise output as US sanctions penalised customers buying Iranian oil, the official said.
Kuwait is producing at full capacity of three million barrels a day as the world economy improves and amid strong demand from Southeast Asia, Sami Rushaid, chairman of Kuwait Oil Co., said in an interview in Dubai yesterday. A stable price for Brent crude of $100 to $110 a barrel is comfortable for producers and consumers, he said.
Output from Opec-member Iran dropped to 2.8 million barrels a day in August, from an average of 3.6 million in 2011, according to data from the organisation. The Islamic republic faces sanctions on its energy and financial industries because of its nuclear programme, which the US and its allies say may conceal efforts to develop atomic-weapons technology. Iran denies the allegation and says it wants nuclear energy only for civilian purposes.
Opec's 12 members will meet next on December 12 to assess market conditions and the group's output policy.