Oil at record high despite Saudi call for output hike
LONDON, March 15: World oil prices climbed on Tuesday, approaching record high points in London and New York, even as Opec kingpin Saudi Arabia repeated calls for a rise in crude output on the eve of the cartel’s key meeting.
New York’s main contract, light sweet crude for delivery in April, climbed 27 cents to $55.22 a barrel in electronic deals, approaching the record high $55.67 seen last October.
In London, the price of Brent North Sea crude oil for delivery in April gained 23 cents to $53.89 a barrel, not far off the record level of $54.30 reached last week.
“The market has not reacted to the Saudi proposal to raise Opec production by 500,000 barrels daily,” Societe Generale analyst Frederic Lasserre said.
Saudi Arabia’s oil minister Ali al-Nuaimi signalled on Tuesday that the kingdom could act alone and increase oil production amid divisions within the Organisation of Petroleum Exporting Countries.
“Uppermost in our mind is to satisfy the demand that is out there,” Nuaimi told reporters in Isfahan, Iran, where Opec ministers were to meet Wednesday.
When asked if the Opec heavyweight would act alone, he replied:
“We have done many things in the past. We will do what we have to do.”
Earlier the minister said he would push other Opec members to boost crude production from its current level of 27 million barrels per day.
He said the boost in output was
needed to meet a predicted increase
in global demand of two million
barrels a day in the second half of
2005.
“We made a proposition although we recognise today that supply is a little bit ahead of demand,” Nuaimi said.
“We project a substantial rise between the third and fourth quarter to the tune of two plus million (barrels per day). Therefore, we believe additional crude is needed.”
Informa Global Markets analyst Peter Luxton said oil prices remained strong because any hike in output “would just legitimise most of the current overproduction.”
He added: “Conflicting signals from Opec ministers indicate the meeting will not be a smooth one.”
Nuaimi acknowledged there were divisions but expressed confidence that he could persuade other members to back his calls for an increase.
“In Opec we meet and everybody brings his facts and we discuss, and hopefully I will be convincing enough to move the rest to my thinking.”
Among those thinking on different lines was Algeria’s Energy Minister Chakib Khelil, who said:
“We can do a goodwill gesture but it does not mean anything in terms of reducing the price.”
Iran’s Oil Minister Bijan Namdar Zanghaneh said the Saudi proposal would not fundamentally change the quantity of oil on the market.
“If we want to officialise the production by adding half a million to the official ceiling it means rollover,” he told reporters.
“It means that we continue the actual production,” he added.
“The difficulty in the market is not the supply shortage, there are some other issues — political, technical, out of OPEC” hands.
And Nigeria’s presidential advisor for oil, Edmund Daukoru, said OPEC members were already pumping out oil “well beyond” the official ceiling.
