Saudi Arabia faced stiff resistance today from Opec producers opposed to an increase in oil supplies that help ease crude prices.Under pressure from consumer countries to contain fuel inflation, Saudi Arabia hopes to push the Organisation of Petroleum Exporting Countries to lift its production target by 1.5 million barrels a day at a meeting today, Gulf delegates said.
Riyadh has support from its Gulf Arab allies Kuwait and the United Arab Emirates to meet rising demand in the second half of the year.
“There is a need for more supply in the market,” Kuwait’s Oil Minister Mohammad al-Busairi told Reuters. “I expect demand to be strong in the third and fourth quarter.”
As Opec’s biggest producer and the only one with any significant spare capacity, Saudi usually gets its way.
But four countries — long-time price hawks Iran and Venezuela plus Ecuador and Iraq — have said publicly they see no need to increase output. All want to keep oil prices above US$100 (RM300) a barrel. Brent crude traded at US$116 a barrel today.
“We do not agree with production being increased now, we must continue to consolidate balance in the market and we have to defend fair prices,” Venezuelan President Hugo Chavez said on Tuesday in Ecuador.
Iran is represented by caretaker oil minister Mohammad Aliabadi, a close ally of President Mahmoud Ahmadinejad and is expected to take a tough line against an increase.
At a minimum, Gulf producers want to close the 1.4 million bpd gap between Opec’s two-and-a-half year old official production limit of 24.8 million bpd and actual output, estimated by Opec in April at 26.2 million.
Beyond that, it will be up to Saudi Arabia to deliver more oil.
Regardless of the policy decision, Riyadh will pump more.
A Gulf official said Saudi was planning to up outut by at least 500,000 bpd in June to 9.5-9.7 million bpd.
Saudi output was last as high in the middle of 2008 after oil prices set a record US$147 a barrel, shortly before recession sent prices crashing.
Backing the Gulf producers are Nigeria and Algeria who sit on a committee that has recommended a one-million-bpd increment.
The numbers suggest more oil is required to stop oil prices rising again.
Opec’s Vienna secretariat is forecasting that demand in the second half of the year will be 1.7 million bpd higher than current cartel output. — Reuters