Saudi plays moderating force within OPEC in era of high prices
Saudi Arabia, the world's top oil exporter and Washington's strongest ally in the Gulf, is playing a moderating role within OPEC to stabilise prices which have soared to their highest level in a decade.
The cartel's kingpin, which sits on the largest oil reserves on the planet, has enough spare capacity to start pumping 10.5 million barrels per day (bpd) within two months, according to industry experts in Riyadh.
They said Saudi output had already risen by some 600,000 bpd since an OPEC quota of 8.253 million bpd was fixed in June.
"The Saudi kingdom is ready to respond to the additional needs of the market to try to halt the explosion in prices and satisfy the seasonal demand on crude," an oil analyst told AFP. "But Riyadh is not going it alone. It is trying to coordinate with its partners in the cartel and non-OPEC producers."
He said their aim was to protect the interests of the market and "avoid a confrontation between producers and consumers".
Ahead of the OPEC summit in Caracas on September 27-28, Saudi Crown Prince Abdullah said in Brazil that his country was prepared to raise output "immediately" if the need arose to bring down prices.And Saudi Oil Minister Ali al-Nuaimi forecast that prices would soon fall.
"But the Saudis have no intention to go it alone in raising production," another expert said, pointing to coordination with neighbouring Iran which has in the past opposed output hikes.
Iran refused to sign on for an OPEC output rise in March, complaining that it was brought about under US pressure. But Tehran finally raised its own production.
Saudi Arabia provided the lion's share of a 720,000 bpd rise in the cartel's production in August, accounting for some extra 400,000 barrels on a tight world market, the expert said.
"They were also behind the three other rises decided by OPEC in March, June and September," he said, with Saudi output now running at an estimated nine million bpd.
Nuaimi has been prominent in efforts to talk down oil prices, suggesting that prices would drop to 25 dollars a barrel from the current level of more than 30 dollars.Analysts said the market would continue to listen to any Saudi comments indicating a willingness to pump more oil, but that it was unlikely any fall in prices would last long in the absence of a firm commitment.
Leo Drollas, chief economist at the London-based Centre for Global Energy Studies, said the statements were meant primarily to serve as a psychological damper on prices.
Saudi Arabia could very rapidly increase production but it was worried that the current boom in oil could be followed by a bust. "They have a great fear that if they put out too much now, there will be a slump next year," he said.—AFP.
©--Agence France Presse.
© 2000 Mena Report (www.menareport.com)