LONDON, 11 May 2004 — Oil prices fell yesterday after Saudi Arabia, the world’s biggest oil exporter, said an output increase by OPEC was essential to help cool prices, which last week hit 13-year high points.
The price of benchmark Brent North Sea crude oil for June delivery shed 85 cents to $36.15 in late trading here. New York’s reference light sweet crude for June delivery lost 88 cents to $39.05 in early deals.
The New York contract hit $40 per barrel on Friday before closing at $39.93, the highest finish since October 1990 when Iraq invaded Kuwait ahead of the 1991 Gulf War.
World oil prices have soared on the back of worries about the threat of fresh terrorist attacks on Gulf oil facilities after gunmen attacked a Saudi oil facility at Yanbu port on May 1, killing five staff of the Swiss engineering group ABB and a Saudi national guard.
Meanwhile, it emerged that tanker loadings from Iraq’s main southern port of Basra have been halved by sabotage of one of the terminal’s two feeder pipelines on Sunday. “We have dropped from an average of 80,000 barrels per hour (bph) to 40,000,” Ali Nasr Al-Rubaie, director of Basra’s offshore terminal, said yesterday.
Aside from terrorism fears, crude prices were also being infected by a feverish gasoline market, with fuel stocks low ahead of the so-called “summer driving season” in the United States when motorists flock to the roads, analysts said.
But comments yesterday by Saudi Arabia’s Oil Minister Ali Al-Naimi helped to cool the market. “It is certain that the Kingdom believes that increasing OPEC’s production ceiling is essential to keep supply and demand balance,” Naimi said. “It is apparent that demand, especially that of Asia, has and will continue to increase in the second half of this year.
“We in the Kingdom estimate the required increase of the (OPEC) ceiling to be no less than one and a half million bpd (barrel per day),” Naimi said in a statement released by the Saudi Oil Ministry. The minister said Saudi Arabia did “not want to see prices rise to the level that they negatively affect the growth of the international economy or the demand for oil.”
OPEC member Kuwait, meanwhile, hailed Saudi calls for increased output. “This position is in line with the stance of the State of Kuwait which had called ahead of the last OPEC meeting in March not to implement a decision to cut production,” Kuwaiti Energy Minister Sheikh Ahmad Fahd Al-Sabah told the official KUNA news agency.
But Commerzbank oil analyst Steve Turner said prices should remain strong. “It’s not going to cause a clash in the oil prices given that we still have the tightness in the US gasoline market, which OPEC isn’t really in a good position to do very much about,” he said.
