Saudi Aramco says crude oil may end year higher

Saudi Aramco, Saudi Arabia’s state oil and gas producer, said crude prices may end the year as high as $82 a barrel because of demand from China and India.

“The prospect is good,” Mohamed Daoudi, head of research and technology at Aramco Overseas Co. B.V., said on Monday in an interview in Stavanger, Norway. “There will be a need for more oil. You see India and China and the needs that are required because the developments there are huge. Most of Saudi Aramco’s exports go to that region.”

Crude fell on Tuesday to the lowest price in seven weeks as investors sought the relative safety of the dollar over the euro before a report that may show U.S. home sales slumped in July. U.S. crude supplies probably increased last week, while distillate fuel stockpiles may hit the highest in 27 years, according to a Bloomberg survey. Crude oil for October delivery fell as much as 1.3 percent to $72.15 a barrel on the New York Mercantile Exchange, extending this year’s drop to 9.8 percent.

Saudi Arabia, the largest member of the Organization of Petroleum Exporting Countries and its de-facto leader, has led production cuts announced in 2008 to support prices. Aramco has about 4 million barrels a day of unused oil output capacity because of the output quota, it said earlier this year.

“The challenge for Saudi Aramco now, as well as the future, is for partnerships in technology development,” Daoudi said. “As far as oil refining, oil exploration and production goes, Saudi Aramco is a leader in the world in terms of know- how. All they want to do now is find partners and develop things together, particularly on technology development.”

New Gas Supplies

The largest Gulf Arab economy is seeking new gas supplies to feed growing demand for electricity and support industries such as petrochemicals. Saudi Arabia aims to discover a minimum 5 trillion cubic feet (142 billion cubic meters) of so-called non-associated gas reserves annually. It is looking at alternative energy sources such as solar power to desalinate water and fuel oil to fire power plants to save natural gas for industry.

Aramco opened areas for exploration in partnerships with Royal Dutch Shell Plc, China Petroleum & Chemical Corp., OAO Lukoil and Eni SpA.

The company has “many discussions going on, to go further with China, India” Daoudi said. (Bloomberg)