OS, Norway, 12 June 2005 — Saudi Arabia’s oil minister said yesterday he supported a 500,000 barrel per day rise in OPEC’s output ceiling and that current prices above $50 a barrel were “too high” and should be brought down.
“Raising the ceiling seems reasonable,” Minister of Petroleum and Mineral Resources Ali Al-Naimi said. “I support the process of raising the ceiling by 500,000 barrels per day, yes,” he told a news conference during a visit to Norway.
OPEC ministers will meet on June 15 in Vienna to discuss output policy for the second half of 2005. The group is expected to consider raising its production limits to help ease prices.
OPEC President and Kuwait’s Oil Minister Ahmad al-Fahd Al-Sabah has said he will propose an increase of 500,000 bpd in OPEC output ceiling if prices remain high.
“I normally wait until we meet, look at the data and decide. However, raising the (production) ceiling - the one that OPEC is talking about - I think that is a very reasonable position,” said Al-Naimi.
“Today, the supply is more than the demand. Inventories are building up,” he said. “Until demand materializes, raising above 500,000 barrels per day is an academic question.”
Asked if he was comfortable with oil prices above $50, Al-Naimi said: “That is on the high side.”
Asked why he supported raising the ceiling, Al-Naimi said: “Because prices are too high...We have to try.”
He declined to say specifically where prices should be.
Oil prices fell sharply on Friday but US light crude closed well above $53 a barrel.
“We have said on many occasions that the price should be fair,” Al-Naimi said, adding that it should be fair for consumers as well as producers.
“And it should have no negative impact on world economic growth, particularly of developing nations,” he said after meeting with Norwegian Oil Minister Thorhild Widvey during a three-day trip to western Norway.
Al-Naimi said that it was unfortunate that prices had not fallen “despite a significant build-up in inventories.” He called the inventory position “very comfortable.”
But Al-Naimi insisted that the market sets the price, not OPEC. “We are a price taker,” he said.
“What we are concerned with is not so much the price as the stability of the oil market,” he said.
Supply currently exceeds demand for oil, but there is not enough demand for the medium and heavy crudes that constitute Saudi Arabia’s spare capacity, he said.
The organization is already producing at a 25-year high. A Reuters survey estimated production for the 10 members which have production quotas at 27.94 million bpd, about 440,000 bpd above the cartel’s ceiling. Iraq does not have a quota.
Analysts say raising the limits may not bring much real new supplies onto the market.
Al-Naimi declined to say if he thought an increase in the OPEC production ceiling would bring real new supply of oil. “You will have to determine that,” he said.
Saudi Arabia is currently producing at about 9.5 million bpd, and it has 1.5 million bpd of spare capacity, Al-Naimi said.
“If the demand is there, we will produce it,” he said, referring to the spare capacity.
Saudi Arabia could make up for a possible shortfall in supplies left by Iraqi or Russian production in the near term, he said.
“What did we do in 2003? Did we fill the gap? Yes, and we will do it again as necessary.”
Widvey said Norway, the world’s third biggest oil exporter, was producing at capacity and could not raise output.
Non-OPEC Norway does not attend meetings of the organization, but keeps in contact with OPEC and non-OPEC oil ministers.
