Saudis: Supply Is Not the Problem

Oil producers are ready to pump more, but blame speculators for high prices.

ByABC News
January 8, 2009, 1:03 AM

JEDDAH, Saudi Arabia, June 22, 2008— -- Saudi officials confirmed today that they will increase the country's oil output by 200,000 barrels a day in the month of July, a move that some hoped would help ease prices around the world.

But whatever positive effect the Saudis' production hike might have had on global oil markets was probably wiped out this week by rebel attacks in Nigeria that likely will take more than 300,000 barrels a day off the market, experts at the Jeddah Energy Meeting said today.

Saudi King Abdullah said the country was ready to increase production even further, if customer demand warrants it, but he said -- speaking for most of the oil-producing countries at the meeting -- that supply was not the problem.

Saudi Arabia also announced it is building a new refinery with tthe assistance of the French energy firm Total. Refinery capacity has been a serious bottleneck, limiting supply to the market.

Despite these announcements, Abdullah said he does not believe that problems with oil supply is what is driving up global prices. Instead, he blamed the "selfish interests" of financial market speculators.

"There are several factors behind the unjustified, swift rise in oil prices, and they are: speculators who play the market out of selfish interests, increased consumption by several developing economies, and additional taxes on oil in several consuming countries," the king said.

However, Abdullah said that Saudi Arabia, the world's largest producer of oil, had always met its customers' demands and would continue to do so.

"We increased because they (our customers) asked for it," a source in the Saudi oil industry told ABC News. But he echoed the king's assertion that supply is not the problem: "Right now, the majority of people think the price of oil is very high. There is no justification for this price."

A draft of the final statement expected to come out of the meeting declares that there is an urgent need to "take the necessary measures to guarantee the stability and permanence of the energy system and raise refining capacities" and "the strengthening of transparency of financial markets having regard to their impact on world petroleum markets," according to a report in Algeria's official APS news agency.