Saudis Raise Oil Production to Curb Prices
Saudi Arabia has been quietly increasing its crude oil production ahead of Wednesday’s meeting of the Opec oil cartel, in a sign that Riyadh is trying to bring oil prices down to more comfortable levels for consumers in the US, Europe and China.
The kingdom boosted production in May by about 200,000 barrels a day and it is on course to increase it by another 200,000-300,000 b/d this month, taking its output above the critical 9m b/d level for the first time since mid-2008.
The rise comes as the seasonal refining maintenance seasons ends, increasing global demand for oil.
Riyadh acted unilaterally earlier this year when it moved to replace some of the production lost due to the civil war in Libya, where oil output has plummeted to 250,000 b/d, down from a pre-crisis level of around 1.6m b/d.
Bill Farren-Price, of consultants Petroleum Policy Intelligence, said Saudi output was “rising sharply” this month due to increased demand from Asian and, to a lesser extent, US refiners.
Another industry official, familiar with Saudi production levels, confirmed that Riyadh was increasing its production in June.
“The Saudis are ramping up their production,” said the official on condition of anonymity. “In part they need to for domestic needs as power demand increases with the arrival of the summer, but also the end of the refiners’ maintenance means more demand.”
Saudi oil output hit a five-year low of 8m b/d in February 2009 as Opec cut production during the global financial crisis to arrest a steep drop in oil prices.
News of the increase in Saudi output came as Opec ministers started to arrive in Vienna for what analysts said was the most politically charged meeting of the cartel in a decade.
The group, which controls about 40 per cent of global crude oil supplies, will consider on Wednesday the first increase in its production quotas – or the official output levels – in almost four years amid political tension in the Middle East.
Libya’s representation at the Opec meeting was in doubt barely 48 hours before proceedings were due to begin. However, Tripoli decided on Monday to send Omran Abukraa, a former head of the national electricity authority, as head of the country’s delegation, said a person familiar with the situation.
Mr Abukraa is loyal to Colonel Muammer Gaddafi’s regime and his arrival will ensure that Libya’s rebel movement has no opportunity to occupy the country’s place at the Opec table. Shokri Ghanem, the Libyan oil minister, defected to the insurgents last month.
Two members of Opec – Qatar and the United Arab Emirates – have openly backed the rebels.
When Mr Abukraa takes Libya’s place on Wednesday, he will be sitting alongside representatives of countries which are helping his opponents.
The political tension is likely to complicate what is already a difficult meeting. While Saudi Arabia and other Gulf neighbors such as Kuwait back a production rise, Opec price hawks such as Iran and Venezuela are resisting a large hike.
Oil prices retreated on Monday as traders and investors braced for an increase in the cartel’s production. In London, Brent crude, the global benchmark, fell $1.57 to $114.25 a barrel. But oil prices are still within a trading range of between $105 and $125 a barrel, which has been in place over the last four months. In New York, West Texas Intermediate fell $1.32 to $98.91 a barrel.