Saudi seeks to reassure markets on future oil supply

OPEC kingpin Saudi Arabia offered fresh reassurances to oil markets, underlining plans to increase production capacity sharply on the back of a massive 80 billion dollar investment.

“Saudi Arabia is working continuously to expand its ability to deliver energy to world markets and especially to the growing Asian market,” Saudi Oil Minister Ali al-Nuaimi said in New Delhi.

“I want to assure you that Saudi Arabia is committed to increasing the availability of energy to global markets,” he told a gathering of oil ministers from several Organisation of Petroleum Exporting Countries members, including Iran.

“These are not hollow words. They are backed up by concrete plans and actions and the commitment of more than 80 billion dollars for capital projects aimed at increasing the supply of energy to world markets and alleviating infrastructure bottlenecks,” al-Nuaimi said.

In London world oil prices rose further on Thursday to above 53 dollars as the US winter turned cold.

New York’s main oil futures contract, light sweet crude for delivery in February, climbed 31 cents to 52.55 dollars per barrel in electronic deals. The price of Brent North Sea crude for March delivery gained 30 cents to 53.08 dollars per barrel.

Al-Nuaimi outlined Saudi intentions to maintain stability.

“Our first priority is a massive investment programme to increase our sustainable production capacity to 12.5 million barrels per day by 2009,” he said. Saudi Arabia pumped around nine million barrels per day (bpd) in 2006.

“Additional projects have been identified for implementation after 2009 if warranted by market conditions” the minister said.

“Our perspective is long-term and our goal is to encourage an environment that is conducive to sustained global prosperity.

“We do this by first, working to ensure (oil) prices provide an adequate return to producers while assuring consumers of continued supplies and sustained world economic growth,” he said.

“Two, by proactively increasing our ability to deliver crude and products to consumers in anticipation of rising global demand, (and) three, by maintaining 1.5 to 2.0 million barrels per day of spare capacity.”

Al-Nuaimi had Wednesday told reporters Saudi Arabia would have total spare production capacity of three million bpd on February 1.

OPEC has an output cut of 500,000 bpd set to start February 1 after a reduction of 1.2 million bpd in November as it tries to support prices.

On Tuesday, al-Nuaimi said there was no need for an emergency OPEC meeting to discuss a possible output cut since the situation in the crude oil market was “healthy.”

He expanded on his views Thursday.

“There is no shortage of hydrocarbon resources that would seriously limit oil’s contribution to meeting this increased demand,” in coming decades.

In the shorter term, the International Energy Agency reduced its forecasts for annual world oil demand on Thursday and said that production cuts by OPEC producers had “ironically” contributed to a recent slump in crude prices.

“Given milder-than-expected temperatures and minor revisions to our economic growth assumption, we have revised downwards our global annual growth forecast for 2006 and 2007,” the IEA said in its monthly oil market report.

The influential energy watchdog said it had pared back its estimate for world oil demand this year by 160,000 barrels per day, saying consumption would average 85.8 million bpd, a 1.6-percent rise from 2006.

But, after issuing a veiled warning to OPEC in December about the risks of cutting output, this month the watchdog said the cartel had itself contributed to the weaker market.