WASHINGTON, 3 March 2004 — Saudi Arabia will act to counter any oil shortage on the world market, Saudi Ambassador to the United States Prince Bandar ibn Sultan said Thursday after meeting with US President George W. Bush at the White House.
The meeting took place as the Organization of Petroleum Exporting Countries, of which Saudi Arabia is a leading member, cut back on production by one million barrels per day for April, a move that threatened to raise already record high US gasoline prices.
“We will not allow any shortage on the world oil market,” said the envoy. “Oil prices should be between 22 and 28 dollars (a barrel). My government’s target is 25 dollars.” Current oil prices are around $35 a barrel.
“We will monitor the market closely in the coming days,” said the ambassador.
Prince Bandar said he had given Bush a message from Crown Prince Abdullah, deputy premier and commander of the National Guard, stating that high oil prices would have an “adverse effect” on the world economy.
He said Saudi Arabia had now, however, pressured OPEC to cut production, saying there was a debate to try and determine whether production was not in fact too high. “The market is acting in strange ways” currently, said Prince Bandar, as a number of countries seek to replace supplies used up during the winter months.
Petroleum and Mineral Resources Minister Ali Al-Naimi yesterday reiterated the Kingdom’s resolve to stabilize world oil market. “Saudi Arabia is concerned with ensuring adequate oil supply to East Asian countries and the world in general,” he said in Beijing after talks with Chinese officials.
“The Kingdom is also concerned with world oil market stability in terms of prices,” he said, adding that the production quota fixed by OPEC was suitable to both oil producing and consuming countries as well as oil industries in general.
Oil prices slid in early trading in London yesterday after US authorities said they were mulling measures to cool a feverish gasoline market and Saudi Arabia pledged to counter any oil shortage.
The price of benchmark Brent North Sea crude oil for May delivery fell 78 cents to $30.77 per barrel. New York’s reference light sweet crude May contract edged up one cent to $34.28 a barrel in pre-opening electronic deals, having tumbled by 1.49 dollars on Thursday.
Prices eased after US Energy Secretary Spencer Abraham told a House of Representatives panel Thursday that the environmental authorities were considering waiving a clean-fuel requirement in three states.
“If that is confirmed, gasoline prices would fall, pulling down crude oil prices in their wake,” said Societe Generale analyst Frederic Lasserre in Paris.
The gasoline market in the United States is very tight, because stocks are low and demand is strong,” he added. The three states require gasoline stations to switch to a costlier, lower emission gasoline in warmer weather, contributing to a spike in prices in the run-up to the summer when roads are busiest.
Saudi Arabia on Thursday defended OPEC’s move to cut production, saying world crude oil prices are high for reasons that have little to do with supply and demand. Adel Al-Jubeir, foreign affairs adviser to the Saudi crown prince, told reporters in a telephone conference call that global oil inventories were at a reasonable level and blamed oil market speculators for driving up the crude price.
Meanwhile, Kuwait’s foreign minister said yesterday that OPEC’s decision to cut production while oil prices are well above the established norm was “irrational” and pledged that his country would act if the world economy suffered as a result. At the same time, Sheikh Mohammad Al-Sabah said the announcement of the cut had not yet produced an expected sharp spike in prices as the world oil market understood the problematic nature of the OPEC move.
“What we witnessed is that the market did not react to this decision the way that one would expect because I think the market realized that this is an irrational decision,” he said.
