Saudi Arabia has offered its main customers in the US, Europe and Asia extra oil supplies through the end of the year, a sign the world’s largest exporter is worried about the impact of rising prices on the global economy.
The Group of Seven finance ministers last month called on oil exporters to expand production. Saudi Arabia initially reacted coolly to the request, saying that global supply and demand were balanced. But the kingdom has recently taken steps to bring down prices, consulting with large refiners and offering them extra oil.
“The current price is too high,” a senior Gulf-based oil official told the Financial Times. “We would like to see oil prices back to $100 a barrel.”
The price of Brent , the global oil benchmark, has risen 33 per cent from mid-June to a peak of $117.95 a barrel on Friday. On Monday it plunged almost $4 in just four minutes, but later recovered.
Saudi Arabia last launched a similar round of consultations with major oil refiners in March, weeks before it boosted its production to a 30-year high of 10m barrels a day. Riyadh is now evaluating the response from refiners.
The nation last month produced 9.9m b/d, but the senior official said that Riyadh was now again pumping around 10m b/d. “We are consulting our clients about their oil needs and telling them we are ready to supply more,” the senior official said.
Opec delegates said Riyadh was trying to bring prices down. “The Saudis are actively managing the market,” added another senior oil official from an African Opec nation. “They supplied a little less when prices dropped to $90 over the summer and they will supply more now that prices are above $115.”
The signal from Riyadh comes as rising energy prices emerge as a contentious political issue in the US presidential race. Mitt Romney, the Republican candidate, has accused President Barack Obama of not doing enough to bring gasoline prices down.
The cost of regular gasoline surged in the US last week to $3.878 per gallon, the highest level ever for this period of the year. US retail gasoline prices reached an all-time high of $4.114 per gallon in early July 2008.
The White House last month dusted off plans to use the strategic petroleum reserve to bring prices down. But so far Mr. Obama has not authorized a release, in part because opposition from allies such as Germany and, to a lesser extent, Italy, Japan and South Korea.
Saudi Arabia wants to reduce prices while avoiding an open confrontation with Iran. Tehran has warned Saudi Arabia not to increase crude oil production to offset the impact of US and European sanctions on Iranian crude oil exports, which fell to a 22-year low of 2.85m b/d last month.
The oil market is on edge as anti-US protests spread across the Middle East and tensions rise between Israel and Iran. A large naval minesweeping drill is also being conducted by more than 20 navies including those of the US, UK and France in the Strait of Hormuz, the world’s most important potential chokepoint for oil tankers.