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Saudi Arabia Can Quickly Add 0.5M b/d Oil to Market

Source: Dow Jones 7/7/2005, Location: Middle East

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Prince Turki al-Faisal, Saudi Arabia's former intelligence chief and now the Saudi ambassador to the U.K., Wednesday reiterated that Saudi Arabia could immediately put an extra 500,000 barrels a day of crude oil into the market if necessary. In an interview with Dow Jones Newswires on the sidelines of an industry event, al-Faisal said: "All I can do is repeat what has been said before," in reference to what action OPEC's largest producer could take in an attempt to ease current oil prices. "We have the availability of at least half a million barrels a day if the market needs it," he said. At the Organization of Petroleum Exporting Countries' ministerial meeting on June 15, Saudi Oil Minister Ali Naimi said the kingdom stood ready to increase output to 10 million barrels a day if demand warranted such a move.

Saudi Arabia is the only producer in the world with an ability to sharply boost output at short notice. But the kingdom has few takers for its remaining 1.5 million b/d of crude because its high sulfur content is difficult to refine. Saudi Arabia currently produces around 9.4 million b/d of crude. Al-Faisal also referred to Saudi Arabia's plans to increase its production capacity to 12.5 million b/d from around 11 million b/d over the next couple of years. But al-Faisal questioned what action oil producers can currently take to ease oil prices, which continue to hover around $60 a barrel. "Whatever OPEC does is not going to be enough. It has to be a global effort."

Al-Faisal said the kingdom is particularly concerned about what impact current oil prices could have on the global economy. And he blamed a lack of refining capacity as one of the reasons behind high oil prices. "Saudi Arabia is as concerned as everybody else. High oil prices mean people will buy less oil - it's in no-one's interest to maintain current prices." However, he added: "Speculators are playing a negative role in this. They are bringing up the price of oil on paper more than it actually is."The front-month New York Mercantile Exchange August crude contract Wednesday was trading 35 cents higher at $59.94/bbl.

On Tuesday, the kingdom reduced most official selling price differentials for August on crudes to the U.S. and Europe. Earlier Wednesday, Al-Faisal told delegates that Saudi Arabia's security situation has improved vastly in recent months. "The security situation is now much better than two years ago, or even six months ago." He said the Saudi government was taking the initiative to track down and eliminate terrorism in the kingdom.Ongoing concerns about security in the kingdom and other Middle Eastern oil producing countries have contributed to high oil prices.

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