Saudi Arabian minister: Fear factor adding $10-15 to oil price

The Associated Press

Saudi Arabia’s oil minister Ali Naimi said Nov. 29 that the “fear factor” over supplies has added US$10 to US$15 a barrel to the price of oil and reiterated that his country is working toward lifting its sustainable oil production capacity.

Naimi said during a speech in London that the recent surge in oil prices differs from the earlier oil crises in 1973-74 and 1979-80, which he said were largely politically driven: “What we’re seeing is totally different. It’s a demand-driven situation. Everyone was taken by surprise.

“All of this has put US$10-US$15 additional on the price of oil,” he told the gathering of economists, analysts and journalists.

Naimi declined to put an exact figure or range on what he believed was a fair price for oil. Oil futures struck a record high of US$55.17 a barrel in late October, amid concerns about future supply, the situation in Iraq, potential strikes in Nigeria and unrest in the Middle East. Light sweet crude for January delivery was up 1 cent at US$49.45 a barrel in New York Mercantile Exchange electronic trading by midday Nov. 29 in Europe.

Naimi said analysts predicted in 2003 that demand for this year would be 1.3 million barrels a day more than last year, but it has instead increased by 2.8 million to 3 million barrels a day.

“We’re trying to catch up,” he said. “We’ve gone to 9.5 million barrels a day. Other OPEC members are at maximum.”

Naimi said Saudi Arabia has already reached a capacity of 11 million barrels a day. The nation has said it holds some 260 billion barrels of proven crude oil reserves — a quarter of the world’s total.

“We have also recently developed plans to increase gradually Saudi Arabia’s sustainable capacity to 12.5 million barrels a day and this will be on new and old oil fields in the next few years,” he said.

Ministers of the Organization of Petroleum Exporting Countries are due to meet Dec. 10 to reassess their supply commitments. Iran and Venezuela have hinted that members could trim their record 30 million barrel a day supplies to prevent crude prices from spiraling lower after months of higher output.