Saudis see world oil market as

Saudis see world oil market as 'slightly oversupplied': advisor

New York (Platts)--11Aug2004


Saudi Arabia, which said Wednesday it could use 1.3-mil b/d in spare
production capacity immediately to cool world oil prices, thinks oil markets
are "slightly oversupplied," but supported by bullish factors outside the
realm of supply and demand, according to a foreign affairs advisor for the
kingdom. Adel al-Jubeir, in a live interview with CNBC from Jeddah in Saudi
Arabia, also said current prices ideally should be "substantially less" than
$40 or $44/bbl.

 Al-Jubeir said instability in Iraq, the Yukos crisis, market speculation, and
potential electoral problems in Venezuela are all contributing to recent
record-high prices. "This is totally separate from the supply and demand
picture, which we believe is not only in balance, but slightly oversupplied,"
he told CNBC. 

Saudi Oil Minister Ali Naimi said earlier Wednesday the kingdom increased its
crude production to average more than 9.3-mil b/d over the past three months,
and is prepared to bring on an additional 1.3-mil b/d of unused spare capacity
if it deems this necessary.

"The reason we announced the increase if need be is to make sure that everyone
knows that even if there was a shortage or supply disruption, we have more
than adequate capacity to make up for it," al-Jubeir said. He told CNBC the
Saudis do not believe that the market's preference for lighter crudes rather
than supplies of heavier grades like Saudi Arabia's Arab Heavy is contributing
to higher prices. 

"This is not really a problem of our doing. We can only produce the oil that
exists underneath our grounds," al-Jubeir said. He would not say where
specifically oil prices should be now, but acknowledged that $40/bbl oil is
"way too high." "There is no reason for prices to be at that level," he said. 

Al-Jubeir also downplayed fears that a terrorist attack would target Saudi oil
installations in a bid to throw the market into turmoil. "The oil facilities
are very secure, they're very well protected," he told CNBC.

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