Saudi Arabia Hints At Oil Output Hike Next Month

Saudi Arabia may increase oil production by 200,000 barrels a day next month. Oil minister Ali al-Naimi told the visiting UN Secretary General that the kingdom would increase production from June to July.

In May, the kingdom increased its production by 300,000. By July, the Saudi production should be at 9.7 million barrels a day, a spokesman travelling with the UN Secretary General Ban Ki-moon revealed.

The UN secretary general met the Saudi oil minister in Jeddah during a one-day trip to the kingdom.

Mr Ban also said Saudi Arabia understood that the current price of oil, which topped $139 a barrel this month, was not normal. “The Saudi king believes that the current oil prices are abnormally high, and he is ready to restore prices to their appropriate levels,” the Saudi press Agency quoted Mr Ban as saying in Jeddah.

However, a report by the Al-Arabiya Television citing an unnamed Saudi oil ministry official said Saudi Arabia was yet to determine the size of a planned oil output increase.

Industry sources said earlier on Sunday that Saudi Arabia was poised to boost output in July to the fastest rate in years to help keep pace with demand and tame what it sees as unacceptably high prices.

The kingdom has called for a meeting of oil producing and consuming countries on June 22 in Jeddah to discuss ways of dealing with soaring energy prices.

Saudi Arabia, the world’s largest oil producer, is concerned that sustained high oil prices will eventually slacken the world’s appetite for oil, affecting the kingdom in the long run.

Opec President Chakib Khelil, has said that the cartel will make no new decision on production levels until its September 9 meeting in Vienna.

Opec on Friday cut its forecast for global oil demand growth in 2008 for the third time this year, the latest sign that record-high oil prices are slowing consumption.

The exporter group also said that it is pumping more than forecast demand for its oil, and that the current production rate combined with extra supply from Saudi Arabia should lead to rising inventories in the third quarter.

World oil demand will rise by 1.10 million barrels per day (bpd) this year, 60,000 bpd less than the previous forecast, Opec said in its Monthly Oil Market Report for June. The previous reductions were in May and February.

The report reaffirms Opec’s view that consumers have enough oil and that factors beyond oil supply and demand are sending prices to all-time highs.

Some consumer countries, such as the United States, say current prices reflect a tight balance between supply and demand. The U.S. this year has been urging OPEC to raise output. But the Organization of the Petroleum Exporting Countries says factors like the weakness of the U.S. dollar, political tension and speculation are leading the market higher.