Saudi Arabia to produce more oil

[Schuyler Colfax]

http://money.cnn.com/2008/06/22/news/in ... 2008062208

JEDDAH, Saudi Arabia (CNN) -- Saudi Arabia will increase its daily oil production to 9.7 million barrels from 9 million to counter the sharp rise in international oil prices, Saudi King Abdullah said Sunday.

The country's petroleum minister, Ali I. Al-Naimi, said that the increase will take place in July.

It would be Saudi Arabia's highest production rate since 1981.

Al-Naimi also said the government will invest in oil projects that would allow the nation to produce 12.5 million barrels per day by the end of the year.

King Abdullah's remarks came at the end of the Jeddah energy summit, where he also called for OPEC to set aside $1 billion for a strategy to ease the oil price crisis. He said $500 million should be given to developing nations to help them get the energy they need.

King Abdullah said there are "many factors that made oil prices high." Along with increased demand, he also cited oil speculators and an increase in taxes in consumer nations.

The pain of escalating oil prices - crude sold for $134 a barrel on Friday, about twice year-ago levels - have cascaded throughout the U.S. economy.

Oil has become a hot-button political issue as the cost of gasoline, diesel and jet fuel have spiked in recent months. Congress has scheduled hearings this week to debate legislation that would attempt to dampen prices.

Bodman: Don't blame speculators

On Saturday, U.S. Energy Secretary Samuel Bodman, representing the Bush administration at the Saudi summit, attributed the record-high oil prices to lagging production.

While some have blamed speculators for driving up oil prices, Bodman said he did not believe they are the cause.

Since 2003, he said, global demand for oil has increased because of industry in China, India and the Middle East. But from 2005 to 2007, there was very little increase in supply.

Nations need an additional supply of energy to market, whether that energy is nuclear, coal, fossil fuels, solar or wind power, Bodman said.

But, "we spent 30 years digging ourselves into this hole," he said. "It won't be solved soon."

--From CNN's Wilf Dinnick

[[R_H]]

And then the price just went up

Oil price up despite Saudi pledge

Oil prices have risen after emergency talks among the world's top oil powers and leading consuming nations over the weekend ended with no real resolution.

US sweet, light crude for August delivery increased by $2.11 to $136.73 a barrel, while London Brent crude rose $1.47 to $136.33 a barrel.

The rises came despite Saudi Arabia's promise to increase daily output by an extra 200,000 barrels a day from July.

Record oil prices have pushed up fuel prices, hitting living costs worldwide.

"The oil summit really has not done much to temper oil pricing," said Victor Shum, an energy analyst with Purvin & Gertz.

No commitment

Fishermen, truck drivers and consumers across Europe and Asia have been protesting against the increase in petrol and diesel costs as oil prices have jumped by about 40% since the beginning of the year.

The oil price has risen more than five-fold since 2000.

This prompted Saudi Arabia, the world's top exporter, to hold a summit over the weekend to discuss the situation with top energy policy makers.

Oil price movements since 2000

Before the meeting, Saudi Arabia had pledged to lift daily quotas to 9.7 million barrels by the end of July, an increase of about 500,000 barrels since May.

But without specific commitment from other members of the producers' cartel Opec to lift production following the meeting, the market considered that Saudi Arabia's move would not be enough to meet soaring demand, especially from fast-growing emerging economies such as China and India.

"I think where the market may be a little more comforted, which could see prices drift lower in the medium term, is more clarity and scope on Opec capacity," said Mark Pervan, an analyst at Australia's ANZ Bank.

Geopolitical worries

Prices were also kept high by news that Nigerian oil fields operated by Chevron and Royal Dutch Shell remained shut after they were attacked last week.

The attack on Shell's installation at Bonga, 120km (75 miles) out to sea, was the first time militants had struck at an offshore oil site, and the move cut a 10th of Nigerian oil production in one go.

The militant group the Movement for the Emancipation of the Niger Delta (Mend) has been targeting Nigeria's oil infrastructure, which supplies crude to the whole of Africa, since 2006, and this has been one factor behind the recent surge in world oil prices.

But in a sudden U-turn, the group called a unilateral ceasefire over the weekend to be effective from midnight on Tuesday until further notice.

Analysts said if it did hold, it may help Nigeria to raise production, which would help to provide some relief to prices. But taking into consideration the scale of past attacks, many analysts remained sceptical.

Oil traders were also eyeing the situation between Israel and Iran following reports that an Israeli military exercise over the eastern Mediterranean was a possible test-run for a strike on Iran.

How much could an increase in production of a few hundred thousand barrels of oil per day have decreased the price? A few cents, if any at all?

[Admiral Valdemar]

Saudi to boost output.

Saudi vows to raise production.

More oil to flow from the KSA.

If the Saudis told me the sky was blue, I'd look out the window to check.

[Elfdart]

I think this is mostly PR, since the Saudis know people are scapegoating them for the high prices and they don't want to hold that hot potato.

[Admiral Valdemar]

It didn't do them good to have one guy blurt out $200 oil. Subsequent iterations of that NY Times article omit the comment.

[Natorgator]

It didn't do them good to have one guy blurt out $200 oil. Subsequent iterations of that NY Times article omit the comment.

I think the fact that oil prices jumped $10 just after that comment is a pretty good indicator that it's speculator/market fears driving the price right now. No amount of extra supply is going to calm that.

[Admiral Valdemar]

I think the fact that oil prices jumped $10 just after that comment is a pretty good indicator that it's speculator/market fears driving the price right now. No amount of extra supply is going to calm that.

Speculators account for these sharp rises and falls in the price, as we can see the ceasefire from Israel and Hamas affected them negatively, while this summit and MEND attacking Nigerian fields makes them jump. The overall trend is clearly up, though, and speculators aren't doing that.

The Saudis promising to open the taps when clearly they can't any more is just foolhardy. Why we entertain these people I don't know, but if the MSM had a clue they'd be seeing how the world's swing producer has a limp dick and can't get it up for us no more.

[Surlethe]

Saudi to boost output.

Saudi vows to raise production.

More oil to flow from the KSA.

If the Saudis told me the sky was blue, I'd look out the window to check.

Did the Saudis not boost their output? It seems to me that in the past few years, their production has been significantly decelerating, but, given that they are planning to boost production next month, I don't think they've quite yet peaked.

[Admiral Valdemar]

They have done so every now and then. My point is that they often promise things and don't deliver, or do something that skews the effects somewhat. Right now, they plan an extra half million barrels, with the caveat that they appear to be losing exports from OPEC according to the tanker trackers. So they boost output, but don't export as much. Sneaky.

It remains to be seen whether Ghawar can be boosted any more, or whether the likes of Khursaniyah, Haradh III and so on can off-set any perceived decline. The most secretive and powerful oil company around is not going to make this easy on people wanting to find out.

[The Duchess of Zeon]

They have done so every now and then. My point is that they often promise things and don't deliver, or do something that skews the effects somewhat. Right now, they plan an extra half million barrels, with the caveat that they appear to be losing exports from OPEC according to the tanker trackers. So they boost output, but don't export as much. Sneaky.

It remains to be seen whether Ghawar can be boosted any more, or whether the likes of Khursaniyah, Haradh III and so on can off-set any perceived decline. The most secretive and powerful oil company around is not going to make this easy on people wanting to find out.

Why would they? If they have more oil than they let on, they wouldn't want anyone to know, so they could justify high prices. If they have less oil, they wouldn't let on, as it would undermine their power to control the market and threaten earlier, more concrete efforts to try and mitigate peak oil.

[Admiral Valdemar]

The Saudis have plenty of projects in the pipeline, the ones I listed are just two of several now coming on-stream or passing final phase testing. the King has already stated the nation's intention to withhold some oil for "future generations", so they have their justification for when everyone cries out again about high prices/low supply. They are merely pandering to the masses right now, acting as quixotic saviours to the industrial world. They have no intention of cooling off the market when they are making hundreds of billions of dollars from such cheap, abundant resources.

And yet, the markets are fickle things, and people soon take notice of these issues when they feel it at the pump, so any big grab media event to give the impression of working to solve the problem is in their interests.

Go by actions, not words. If these extra supplies do show up, don't expect it to last past the end of summer. It should be obvious to even Bush and Brown now that we shouldn't be relying on these greedy, despotic cartel members. Both their nations have peaked in oil, why can't they grasp this can happen to even the mightiest oil power today?

[bobalot]

An increase of 700,000 barrels per day is a significant increase from a single supplier. But the world uses 85 million barrels per day, and that figure is growing. So not much of a great impact.

The real question is: Can the increased production from some suppliers offset the decline in others? Looking at some of the expected declines from places such as the North Sea, Mexico etc. , I don't think so.