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Lloyds List: Saudi Arabia agrees to lift production

Bid to curb price rises while it continues investment, writes Martyn Wingrove
Jan 26, 2006
SAUDI Arabia has pledged to raise its oil production levels if required and continue supplying Asia with its crude requirements.
The world's top oil producer is ready to keep its oil taps flowing to prevent prices from climbing further while it continues to invest in existing fields to raise production capacity.
At the Organisation of Petroleum Exporting Countries ministerial meeting next week Saudi officials will also urge fellow members to keep production quotas level.
Saudi King Abdullah and his delegation of ministers and business leaders are this week visiting four Asian countries, including booming energy consumers India and China, to improve diplomatic agreements.
The kingdom is creating new trade links with Asian countries which are increasingly reliant on crude imports from the Middle East.
King Abdullah said his country was committed to supplying Indian and Chinese energy needs and that oil prices were too high, damaging the economy of developing countries.
'We have the ability and capability to provide all the energy needs of India and other countries,' he said in a television interview in New Delhi.
'Saudi Arabia's oil reserves will be there for the long term for every one.
'A large portion of the country has not been explored as yet.'
Saudi Oil Minister Ali al-Naimi added: 'Fundamentals today are in excellent shape and inventories are at reasonable levels. Oil supply is plentiful and demand is well met by supply.'
Mr al-Naimi also said his country was ready to pro- duce more oil if needed and added that Opec was likely to keep output steady when it meets on January 31 in Vienna.
Saudi Arabia is investing in several of its oilfields, including the world's largest offshore field, to make sure it has the ability to supply global demand increases for many more decades.
But much of the new capacity it is building is in heavy, sour crudes, less attractive to refiners.
Opec, which produces around 28m-29m barrels of oil a day, has plenty to think about at this meeting as it wants to keep oil prices high and continue to meet global demand.
Iran is the leading voice within the cartel, calling for production cuts in the second quarter when global demand begins to fall for seasonal reasons, but there will be resistance from Saudi Arabia.
Analysts at the Centre of Global Energy Studies in London think the cartel will choose to maintain production levels during the second quarter.
'The oil market has tightened over the past week, reducing the pressure on Opec to make an early output cut to support prices,' the centre said in its latest monthly report.
'A combination of cold weather, a slow recovery in non-Opec output and a reduction in Opec's own oil supplies, have tightened the supply-demand balance.'
Fears of output disruption in Opec members Iran and Nigeria have been a prime factor in pushing up oil prices this month.
Iranian officials have threatened to use its oil exports as a weapon if Western powers get in the way of its nuclear research and development programme.
Nigeria exports are down by 220,000 barrels a day due to tribal unrest in the Niger delta.
Royal Dutch Shell has called force majeure on its exports through the Forcados and EA terminals in the country after attacks on the Trans Ramos pipeline and offshore installations.
This has been partly offset by rising deepwater oil production from the Bonga field, which is pumping out 150,000 barrels a day.
On the positive side, Iraqi exports are rising with higher volumes coming from the Middle East Gulf terminal at Basra and the reopening of an export pipeline from northern Iraq to Ceyhan in Turkey.
Higher oil prices have obviated the need for Opec to contemplate production cuts and have led to Saudi Arabia's reassurances on supply.
This week, US oil prices rose to $67 a barrel and London's benchmark Brent was trading around $65 because of geopolitical tensions and production outages.
Traders will be eagerly waiting to see how Opec's meeting next week goes, but most think the status quo will be kept.

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