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Sat 14 Jun 2008 11:56 AM

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Summit seeks solution to record oil prices

Saudi Arabia committed to world economy and balanced global oil market - oil minister.

Top world oil exporter Saudi Arabia said on Friday a meeting of consumers and producers it will host on June 22 should seek a solution to high oil prices which could hurt the world economy.

Saudi Oil Minister Ali Al-Naimi, speaking to state news agency SPA, also reiterated that market fundamentals, such as supply and demand, do not justify current prices, which were trading near $135 a barrel on Friday.

"The kingdom called this meeting based on its positive role in international relations... and its commitment to the world economy and a balanced global oil market...," SPA quoted Al-Naimi as saying.

The comments came on the same day as industry newsletter the Middle East Economic Survey, without identifying a source, said that Saudi Arabia was considering a sizeable boost in production. Oil fell on the report.

Saudi Arabia is considering an increase that could bring its output near to record levels of around 10 million barrels per day (bpd), MEES reported, a move analysts said would dampen prices and lead to rising inventories.

"It will have a huge impact," said Leo Drollas of the London-based Centre for Global Energy Studies. "I think we will see large stockbuilds."

Saudi oil officials declined to comment to newswire Reuters on any plans to boost oil output.

Oil prices on Friday fell further from the record high of $139.12 reached a week ago. US crude was down $1.70 at $135.04 as of 1523 GMT.

Saudi Arabia's production in June was expected to reach 9.45 million bpd after Riyadh said in May it would increase supply by 300,000 bpd, following a visit by US President George W. Bush.

A boost in Saudi supply to close to 10 million bpd would be higher than the largest annual average of the country's production in more than two decades, according to figures from OPEC.

Saudi supply averaged 9.35 million bpd in 2005, the highest since 1986, according to OPEC, although analysts say output has been higher than that for some short periods since.

The kingdom is the only country able to boost production substantially at short notice. Most of its fellow members of OPEC are pumping flat out, analysts say.

Saudi Arabia wanted "producer and consuming countries and concerned parties to work together to counter a global issue that may have negative effects on the world economy, particularly developing countries," Al-Naimi said.

Any supply boost would be welcomed by consumer governments who have been pressing OPEC for more oil but were not expecting extra barrels to be provided as the group has insisted supply is sufficient.

British Prime Minister Gordon Brown, who plans to attend the June 22 meeting in Jeddah, said on Thursday he did not expect the talks to result in a short-term rise in oil output. (Reuters)

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