Saudis reject supply fears but won't increase output

Saudi Arabia and other Gulf producers have assured Asian countries their oil supply is secure at a recent meeting in Riyadh. But Middle East oil ministers attending warned they would not increase output to ease high prices.

"I would like to assure you that the importing Asian nations can depend on West Asia for future security and reliability of oil supply," said Ali al-Naimi, Saudi Arabia's oil minister.

Security of supply has caused concern for Asia, which imports much of its oil from the Middle East. Economic expansion in the region is feeding growing demand for crude from the Gulf.

"Given their heavy dependence on Middle East oil and gas, Asian countries do have reason for concern on many counts," said David Butter, chief energy analyst for the Economist Intelligence Unit. "These include the perennial geopolitical tensions in the region, the persistently small margin of spare capacity over demand, and the strength of forecast demand from China and India."

Butter argues it is important for producers embarking on huge spending programmes to boost output in the long term in order to ensure future demand. He said an increase in global oil demand averaging 1% to 1.5% per year means one million barrels per day (bpd) will be needed in net additions to output. "The major producing countries with large oil reserves are best placed to deliver this incremental output," he said. "So far, Saudi Arabia is the only country that has seriously taken this on board."

Naimi contended 70% of the world's future oil demand growth would come from Asia. Kuwaiti oil minister Sheikh Ali al-Jarrah al-Sabah also said there was no need for OPEC to consider boosting oil supplies, though the group would not hesitate to raise output when necessary. Butter said certain conditions would have to apply before this occurred, including "clear signs of demand starting to outstrip supply and prices spiking at over US $70 per barrel."

Asian ministers may ask OPEC to open the taps and reverse some of the 1.7 million bpd cuts the producer group agreed to late last year.

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic. Arabian Business would like to point out that only comments relevant to the story will be published. Any containing personal insults or inappropriate language will not be approved.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM