JEDDAH, Saudi Arabia - Top exporter Saudi Arabia is ready to pump more oil for the rest of the year, although that is unlikely to tame record prices, Saudi Arabian Oil Minister Ali al-Naimi said on Sunday.
”I am convinced that the supply and demand balances and crude oil production levels are not the primary drivers of the current market situation and that markets are already well-supplied,” Naimi said in a speech.
”But ... I also strongly believe that each of us must do what we can to alleviate these difficult conditions”.
Saudi Arabia has already said it will produce 9.7 million bpd in July, marking an increase in output of 550,000 bpd since May.
Naimi said the kingdom would pump at or above that level for the rest of the year if there was demand from its customers.
”For the remainder of this year, Saudi Arabia is prepared and willing to produce additional barrels of crude oil above and beyond the 9.7 million barrels per day which we plan to produce during the month of July,” Naimi told a meeting of producer and consumer countries in Jeddah.
Saudi Arabia called the unprecedented meeting in response to record moves on the oil market.
Oil hit a peak of nearly $140 a barrel and rose by almost $11 in a single trading session early this month, a jump Naimi said was driven by factors other than supply and demand.
”A simplistic focus on supply expansion is therefore unlikely to tame the current price behaviour,” he said.
For the longer term, Naimi said Saudi Arabia could increase its available capacity by an extra 2.5 million bpd above a current plan to reach 12.5 million bpd by the end of next year.
”We have identified a series of future crude oil mega-increments totalling another 2.5 million barrels per day of capacity that could be built if and when crude oil demand warrant their development,” Naimi said.
Apart from the short-term supply-demand balance, investors have bought into futures markets because they believe oil supplies will be under strain for the foreseeable future.
Naimi said such long-term fears were “badly misplaced” and that the world had enough oil resources to meet demand for ”many, many decades to come”.
The minister also said Saudi Arabia would invest $129 billion in the energy sector in the next five years, spanning the upstream and downstream sectors both at home and abroad.
”As the old phrase says, we’re putting our money where our mouth is,” Naimi said.
One of the divisions at Sunday’s talks has centred around the reluctance, as oil producers see it, of consumer countries to acknowledge the role speculation has played in current prices.
But Naimi welcomed steps by U.S. regulatory authorities to try to rein in speculation on oil futures markets.
He also said consumer countries should take responsibility for tackling all the other issues beyond supply and demand that have affected oil prices, including political tension, fuel taxes and subsidies.
”I believe this set of issues has to be addressed primarily by parties other than oil producers—and yet they must be tackled if we are to resolve the current dilemma of high, unpredictable oil prices,” he said.