PARIS, 22 April 2005 — Saudi Arabia is supplying customers with all the oil they want, Saudi Arabian Oil Minister Ali Naimi said yesterday in Paris. He was responding to comments by US President George W. Bush on Tuesday urging Saudi Arabia to take account of high oil prices on the world economy.
Questioned during the sixth international oil summit being held here, the minister said: “I will repeat. Saudi Arabia is not responsible for the price of oil in the market.” He added: “We try to respond to our customers, we have not turned down a customer who says ‘I want additional oil’.”
The Saudi minister even joked with journalists, saying: “You can find customers for us, send them over and we’ll be happy to satisfy their requirements.” On Tuesday, Bush had said he would raise the question of high oil prices with Crown Prince Abdullah when he visits Bush’s Texas ranch on April 25.
“I will be talking to our friends to make sure if they pinch the economy too much, it will affect their ability to sell crude oil in the long run,” Bush had said. Naimi was asked about Saudi Arabia’s planned production for May and whether the world’s biggest crude producer would raise its current level of 9.5 million barrels per day.
“Our policy with respect to the production level is: you don’t produce for nothing, you produce for a customer, and that’s how I want to leave it,” he replied. The Saudi minister also forecast that higher interest rates in oil consuming countries would incite investors to get out of the oil futures market.
Saudi Arabia will work to keep spare supply capacity of at least 1.5 million barrels per day, but its ability to curb price rises is now limited, Naimi said. Naimi reiterated that the Kingdom aimed to maintain a cushion of 1.5 to 2 million barrels per day. “Saudi Arabia has increased its production to meet customers’ demand to the tune of 9.5 million barrels per day, increased its production capacity to 11 million bpd and will increase capacity to 12.5 million bpd by early 2009,” Naimi told the conference.
“If need be, Saudi Arabia is ready to continue its capacity expansion to 15 million bpd and sustain such capacity for over 50 years,” he added. Rising world oil demand, especially in Asia’s emerging economies, has strained international supplies to the limit, leaving little spare production capacity and pushing prices to record highs.
OPEC members, especially Saudi Arabia, have raised production to try and build a stock buffer for higher demand expected at the end of this year. “In the short-term, we intend to continue doing our best to stabilize the market by increasing our exports according to the needs of our customers,” Naimi said.
Industry sources have said that the Kingdom will raise supplies to its term customers in Asia and the major international oil companies by 500,000 bpd next month, putting it near 10 million bpd for the first time since 1980. Naimi said the ability of the Kingdom and other OPEC producers to control price rises had been weakened by the growing influence of big-money funds on prices and refinery bottlenecks in consuming nations.
Speculation amid high and volatile oil prices has been advanced in some circles as one cause of sustained tensions in the oil market. “If you convince the consuming governments to increase real interest rates, you will see an outflow from the futures market,” he said. Most investors do not see such a scenario as likely in the short term, Naimi said, before adding that “as soon as these interest rates move they’ll probably go into better financial instruments such as bonds.”
