Saudis plan sharp oil output increase
Source: Agencies |
June 8, 2011, Wednesday
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SAUDI Arabia is planning to raise oil output sharply in June, whatever policy OPEC adopts this week, in an effort to rein in high fuel prices.
Riyadh expects to lift production by more than 500,000 barrels a day in June to its highest for three years, a senior Gulf industry official familiar with Saudi oil policy said yesterday.
Worried about the impact on economic growth of inflated energy costs, Saudi will act alone if necessary to keep a lid on prices now at US$114 a barrel for benchmark Brent crude. The biggest producer in the Organization of the Petroleum Exporting Countries, Saudi wants the cartel to lift formal output limits at a meeting today to show consumer countries that it sees the danger to the economy of runaway oil prices.
So far it only has the support of its Gulf Arab allies Kuwait and the United Arab Emirates among the 12-member cartel.
"I expect OPEC to increase output during this meeting but I am still unsure how much," Kuwaiti Oil Minister Mohammad al-Busairi said.
The Gulf official said Saudi production was likely to average 9.5-9.7 million barrels per day in June. A Reuters estimate put output at 8.95 million bpd in May.
Saudi output was last as high in the middle of 2008 after oil prices set a record US$147 a barrel, shortly before recession sent prices crashing.
"This is a display from the Saudis that they have control," said Scott Niquist of consultants McKinsey. "OPEC is very eager to have control over the market in the short term. There was a sense that the control that they had was lost."
The extra Saudi supply won't all go for export. Direct crude burn at power plants to fuel summer air conditioning and higher refinery throughput for the return to service after maintenance of the Red Sea Rabigh refinery will soak up at least half the increment, Middle East analysts estimate.
Riyadh's production intentions may overshadow an OPEC meeting which Gulf Arab producers want to restore credibility to the producer group's out-of-date supply limits.
The Gulf producers want, at least, to close the 1.4 million bpd gap between OPEC's two-and-a-half-year-old official production limit of 24.8 million bpd and actual output, estimated by OPEC in April at 26.2 million.
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