Saudis Reportedly To Pump More Oil
Monday, July 3rd 2000, 12:00 am
By: News On 6
ASWAN, Egypt (AP) â€” Saudi Arabia intends to put 500,000 additional barrels of oil on the market every day starting immediately to try to get soaring prices down to $25 a barrel, an official from an OPEC delegation said Monday.
The source, speaking on condition of anonymity, said the Saudis were acting because they were the only producers with enough reserves to increase production. He also said the Saudis would move to decrease production if prices fell below $25.
Prices are now hovering around $30 a barrel.
Kuwait and the United Arab Emirates are the only other OPEC members with enough capacity to quickly produce and export significant additional amounts of crude.
Saudi Arabia, the world's largest oil producer and exporter, had reportedly been trying to persuade other producers to raise exports above and beyond the additional 708,000 daily barrels agreed to at a meeting in Vienna last month of the Organization of Petroleum Exporting Countries.
Oil prices have not gone down, despite the increase.
Industry analysts reacted skeptically to the possibility the Saudis would increase production unilaterally.
``It sounds too desperate for the Saudis. They wouldn't want to be seen to act ... without some of the others coming along with them,'' said Leo Drollas, chief economist of the London-based Center for Global Energy Studies.
Jeremy Elden of Lehman Brothers in London said it would seem ``slightly odd'' for the Saudis to increase production on their own. Nonetheless, Elden suggested that the increase would bring prices down.
Saudi Arabia has excess production capacity of 2.3 million barrels per day that can be put on the market in a short period of time if necessary, another OPEC official had said on condition of anonymity earlier this week. As of July the kingdom's quota is 8.25 million barrels per day.
The Saudi economy is 70 percent dependent on oil revenues. Saudi officials fear they will be hurt in the long run if prices remain high. They need stable prices to plan spending, and high prices could reduce demand and spur consumers to turn to alternative fuels.
Pressure is building in the United States, the world's largest oil consumer and a close Saudi ally, for relief from sharply higher gasoline prices.
Earlier Monday, a Qatari oil official said OPEC was considering a production increase of even more than 500,000 barrels a day if its basket price of crude sharply exceeds $28.
Previously, officials had said OPEC members were considering an increase of 500,000 barrels a day if the OPEC basket price topped $28 for 20 consecutive trading days.
On June 20, the OPEC basket price broke above $28 per barrel and has held above that level since in a range of between $28.97-$30.10, according to OPEC.
On the New York Mercantile Exchange, light, sweet crude for August delivery â€” which trades at roughly $2 higher than the OPEC crude basket â€” closed Friday at $32.50 a barrel. Trading was closed Monday for the Independence Day holiday weekend.
August contracts of North Sea Brent crude rallied by 48 cents from Friday's close to $31.05 per barrel in late trading on the International Petroleum Exchange in London on Monday.
OPEC oil ministers are set to meet in Vienna Sept. 10. They had not been expected to take decisions on oil output before then.
OPEC members are Saudi Arabia, Iran, the United Arab Emirates, Kuwait, Qatar, Nigeria, Libya, Algeria, Venezuela and Indonesia. Iraq also is a member but has not participated in recent OPEC production pacts.