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Tue 8 Mar 2011 09:27 PM

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Saudi Arabia develops new crude blend to help offset shortages

Oil minister Ali al-Naimi says kingdom has 3.5m barrels of spare output capacity if needed

Saudi Arabia develops new crude blend to help offset shortages
OPECs headquarters in Vienna. (Getty Images)

Saudi Arabia’s
oil minister Ali al-Naimi said on Tuesday his country is developing a blend of
light, low-sulfur crude to help offset supply shortages and will meet
any increase in demand, the official Saudi Press Agency reported.

The kingdom,
OPEC’s biggest producer, has raised crude stockpiles at storage
facilities in Egypt, the Netherlands and Japan to help meet demand
swiftly, al-Naimi said, adding that Saudi Arabia has 3.5m barrels
of spare output capacity.

Fighting in
Libya between government forces and rebels opposed to leader Muammar
Qaddafi has curtailed crude output in the country, Africa’s
third-largest producer, by as much as 1m barrels a day, according
to the International Energy Agency.

The North African nation pumped
1.39m barrels a day in February, down from 1.59m the
previous month, according to Bloomberg estimates.

Vienna-based
researcher JBC Energy estimated that Libya pumps 8.8 percent of
total global output of light, sweet crude, or oil with low density and
sulfur content. This type of crude yields more valuable refined fuels
such as gasoline and diesel.

“The Kingdom
has taken steps to develop a special crude oil blend which is closer in
quality to the supplies which have been lost by utilising mixes from
its different fields,” the report quoted al-Naimi as saying. The mixes
used in this new blend are lighter in gravity and lower in sulfur,
“helping to minimize crude-quality concerns,” he said, according to SPA.

Saudi Arabia
is storing additional crude at storage facilities in Sidi Kerir, Egypt,
Rotterdam in the Netherlands and Okinawa, Japan, to help meet any
additional demand for its production, the report said, citing al-Naimi.

Saudi Arabia
and other members of the OPEC
have committed to ensure that enough oil reaches global markets to
compensate for lost Libyan barrels. New York-traded oil rallied
yesterday to $105.44 a barrel, the highest closing price since September
2008, and was trading at $105.01 at 4:37pm on Tuesday in London.

Al-Naimi
said oil markets are well-supplied and that recent gains in crude prices
were based on speculation and an unrealistic impression about
fundamental supply and demand, according to the report.

Saudi
Arabia’s 3.5 million barrel-a-day spare production capacity is readily
available to help offset supply shortfalls, he said. This excess
capacity includes a mix of crude grades and allows his country to meet a
broad range of needs, he said, according to the report.

“The Kingdom
of Saudi Arabia has long been committed to promoting market stability
in the interest of both producers and consumers, and in support of
global economic growth and development,” al-Naimi said. “Time after time
we have delivered on that commitment by tapping our additional crude
oil production capacity when supply conditions warranted, and Saudi
Arabia will continue to reliably meet the world’s petroleum needs.”

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