Saudis threaten to go it alone with increased oil output
A rift developed in advance of a crucial OPEC meeting today when Saudi Arabia said it would go-it-alone if its plan to increase production to counter price rises is rejected.
The Saudi proposal to hike OPEC’s oil production ceiling to bring it in line with real output appeared to be losing favour, with Libya’s oil minister saying most members were opposed.
Amid the seeming rift between OPEC’s major oil producer and most others in the 11 nation organisation, oil prices hit near-record levels.
“There’s mostly a consensus not to increase by 500,000 barrels a day at this time,” Libyan Oil Minister Fathi bin Shatwan told said ahead of tomorrow’s policymaking meeting of the Organisation of Petroleum Exporting Countries in Isfahan, Iran.
Earlier, the group’s Kuwaiti president and Saudi Arabia said OPEC would likely raise its production ceiling by 500,000 barrels a day to head off rising prices and calm a jittery international oil market.
Saudi oil minister Ali Naimi appeared to confirm his country was ready to go it alone in formally increasing output even if others were opposed.
“We have done that in the past in order to meet the requirements in the market,” he said. ”Uppermost in our minds is to satisfy the demand that is out there.”
Even if accepted, agreement on increasing production above the official ceiling of 27 million barrels a day would have mostly a psychological impact as OPEC is already producing about 700,000 barrels above its quota.
The move would do little to alter market fundamentals, or worries that projected strong demand for this year would outpace OPEC’s ability to produce enough crude.
Algerian Oil Minister Chakib Khelil reflected widespread pessimism even within Opec about the proposal, telling reporters: “We can do a goodwill gesture, but it doesn’t mean anything in reducing prices.”
Even if the ceiling is raised, oil traders say any relief is likely to be temporary.
“I think the thing is not so much supply, but demand,” said Lee Fader, a trader for ABN Ambro in New York. “If demand stays strong, it could use up that oil very quickly.”
