29-11-04

Saudi Arabia's oil minister Ali Naimi said that the "fear factor" over supplies has added $ 10 to $ 15 a barrel to the price of oil and reiterated that his country is working toward lifting its sustainable oil production capacity. Naimi said during a speech in London that the recent surge in oil prices differs from the earlier oil crises in 1973-74 and 1979-80, which he said were largely politically driven.
"What we're seeing is totally different. It's a demand-driven situation. Everyone was taken by surprise," Naimi said. "All of this has put $ 10-$ 15 additional on the price of oil," he told the gathering of economists, analysts and journalists.

Oil futures struck a record high of $ 55.17 a barrel in late October, amid concerns about future supply, the situation in Iraq, potential strikes in Nigeria and unrest in the Middle East. Light sweet crude for January delivery was up 1 cent at $ 49.45 a barrel in New York Mercantile Exchange electronic trading by midday in Europe.
Naimi said analysts predicted in 2003 that demand for this year would be 1.3 mm bpd more than last year, but it has instead increased by 2.8 mm to 3 mm bpd.
"We're trying to catch up," he said. "We've gone to 9.5 mm bpd. Other OPEC members are at maximum."

Naimi said Saudi Arabia has already reached a capacity of 11 mm bpd. The nation has said it holds some 260 bn barrels of proven crude oil reserves, accounting for a quarter of the world's total. Naimi said the Qatif and Abu Safah projects had increased capacity by 800,000 bpd ahead of schedule.
"We have also recently developed plans to increase gradually Saudi Arabia's sustainable capacity to 12.5 mm bpd and this will be on new and old oil fields in the next few years," he said.

Ministers of OPEC will meet in Cairo to reassess their supply commitments. Iran and Venezuela have hinted in the run-up to the meeting that members could trim their record 30 mm bpd supplies to prevent crude prices from spiralling lower after months of higher output.
Naimi also said that he saw little reason to find a new currency, or basket of currencies, to replace the dollar as the price for oil, despite the US currency's recent weakness.

The dollar, which sank to a record low of $ 1.3329 against the 12-nation euro currency, has been sliding for months partly on concerns about the ballooning US trade and budget deficits.
"The dollar is still the currency for international trade, and is used to back up reserves and is easily convertible," Naimi said.

Source: Associated Press