NEW YORK/JEDDAH, 16 September 2005 — Saudi Arabia has pledged again to pump more crude if required, but said what world consumers need most are refined fuels such as gasoline and heating oil. Crown Prince Sultan blamed a price spike that took US crude to $70.85 a barrel on a global shortage of refineries, not the crude to run in them.

“We are concerned about the rise in oil prices and confirm the Kingdom’s readiness to do its utmost to compensate for shortages in supply and to meet increasing demand,” Prince Sultan was quoted by the Saudi Press Agency as saying at a reception hosted by the Saudi-American Business Council in New York on Wednesday.

“The current rise in oil prices does not stem from a shortage in crude oil supplies but is due to, as everyone knows, increased demand for products and a shortage in refining capacity...” he said.

Crown Prince Sultan said the Kingdom had already increased its production to 11 million barrels per day. “We are working on further raising our output gradually to reach 12 million bpd by 2009,” he told Saudi and US businessmen. He emphasized the importance of dialogue between producing and consuming countries to achieve world market stability. The Organization of the Petroleum Exporting Countries meets in Vienna next week and its president has said he would propose the group raise its output by 500,000 bpd.

But Qatari Energy Minister Abdullah Al-Attiyah said the proposed hike, viewed by analysts as a goodwill gesture, was unlikely to ease prices and urged consuming states to make it easier to build new refineries to produce more fuel. “I do not think that this will have an effect,” Qatar’s state news agency QNA quoted him as saying in a radio interview. “The sharp demand for products is the reason behind the rise and not demand for crude oil,” Attiyah said.

OPEC has already raised output by more than four million barrels per day over the past three years and is operating close to full capacity. Only Saudi Arabia has any significant spare capacity. But much of the Kingdom’s extra oil is medium-to-heavy, high-sulfur crude that is harder for refiners to process into light transport fuels.

The closure of US refineries by Hurricane Katrina has also left OPEC and other heavy crude producers such as Mexico and Venezuela, struggling to find homes for those barrels left behind. OPEC has struggled to tame a two-year price rally that has doubled crude prices. It blames much of the rise on the world’s shortage of sophisticated refineries.

Prince Sultan also blamed high prices on natural disasters, in a reference to Hurricane Katrina, security concerns in some producing countries and speculation on oil markets.

Oil prices extended gains above $65 a barrel yesterday on worries over heating fuel supplies. Prices hit a record above $70 a barrel after Katrina shut down some refineries in the US Gulf of Mexico and cut supplies. “Producing states have and still call on consuming nations, especially the United States and Europe, to facilitate the granting of licenses to build more refineries,” Attiyah said.

Abdul Aziz Al-Quraishi, president of the Saudi-American Business Council on the Saudi side, said Saudi Arabia was planning to carry out infrastructure projects worth $600 billion by 2020. “I am happy to note that many American companies are now interested to do business in the Kingdom,” he told the gathering.

The International Energy Agency said yesterday it would stick by its initial response to fears of global oil shortages after Hurricane Katrina, following speculation that more emergency oil stocks would be made available. The IEA announced on Sept. 2 that its members would release 60 million barrels of oil from strategic reserves over a 30-day period to counter the effects of Katrina, which devastated oil-producing capacity on the Gulf coast of the United States.

After a meeting of the IEA board, executive director Claude Mandril said the energy watchdog would neither extend the release period, nor increase the volume of releases, which include both crude and refined oil products. “The IEA governing board, after reviewing its initial collective response action ... has decided to maintain its action,” he said.

—With additional input from Reuters