OPEC gives mixed reaction to Saudi output hike

MIXED REACTION: Kuwait has backed Saudi Arabia's planned increase in production, while Ian, Iraq and Libya have questioned what it will achieve. (Getty Images)

Saudi Arabia has received a mixed reaction from fellow OPEC members to its planned output hike, with some welcoming the move while others have said the market is well supplied and more oil will not bring down prices.

Saudi Arabia, the world's top exporter, plans to increase production next month to 9.7 million barrel per day (bpd) in an effort to tame prices, which hit a fresh record above $139 on Monday, according to UN chief Ban Ki-moon.

The increase would take Saudi crude output to its highest monthly rate since August 1981, according to US government data.

Kuwait on Tuesday backed its Gulf neighbour, saying prices were too high and energy costs were restricting growth and adding to inflationary pressure.

"I think it's high," Kuwait Finance Minister Mustafa Al-Shimali said in an interview in Isfahan, Iran, reported newswire Bloomberg. A reasonable oil price would be "more or less $100", he said.

However, Iran, Iraq and Libya all expressed doubts the rise in output would have a significant impact on crude prices, with some Iranian officials even criticising Saudi for acting unilaterally.

Iran, OPEC's second-largest producer, and other members have repeatedly said the market is well supplied and blamed high prices on speculation, a weak US dollar and political tension.

"The current rise in oil prices is not due to shortage in the market," Hojjatollah Ghanimifard, international affairs director of the National Iranian Oil Company, told Mehr news agency.

"At this point, adding 100,000, 200,000, 300,000, 400,000 and even 500,000 bpd will not create a balance in prices."

A second Iranian official was critical of the Saudi plan, calling any unilateral supply boost by the kingdom "wrong".

"Any output increase should be ratified in this organisation's (OPEC's) ministerial meeting," the website of Iran's state broadcaster reported Iran's OPEC Governor Mohammad Ali Khatibi as saying.

Meanwhile, Iraq's Oil Minister Hussein Al-Shahristani reiterated that prices were being driven by speculation, and said regulators needed to step in to stabilise oil markets.

"I do not think increasing any amount in the international market will have a significant impact on the prices," he said.

Libya on Tuesday also reiterated that supply was not the reason for rising prices and questioned whether others in OPEC were able to add more oil.

"I do not think there is enough spare capacity in other countries," Shokri Ghanem, chairman of Libya's National Oil Corporation, told Reuters, asked if he expected more OPEC countries to raise supply.

According to the International Energy Agency (IEA) earlier this month, OPEC holds less than 2 million bpd of unused production capacity, of which the bulk lies in Saudi Arabia.

OPEC itself has said its members' unused capacity is higher than that.

The Saudi plan comes ahead of a meeting of producers and consumers it is hosting on June 22 to discuss the reasons for high prices and amid calls from consumers, such as Britain, for more oil.

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