Saudi Arabia can increase crude production by as much as 25 percent immediately if needed, the country’s oil minister said, seeking to allay the concern over supplies that has driven prices to the highest in three years.
Brent crude has gained 15 percent in London this year to about $124 a barrel. Iran has threatened to shut the Strait of Hormuz at the entrance to the Persian Gulf, a transit point for a fifth of the world’s traded oil, in response to sanctions on its crude exports imposed over its nuclear program.
“If you believe Hormuz will be closed, I will sell you the Empire State or the Egyptian pyramids,” Ali al-Naimi said in a briefing with reporters in Doha, Qatar Tuesday. “I want to assure you that there is no shortage of supply in the market. OPEC is supplying what it needs, we have capacity, additional reserves of 2.5 million barrels” a day.
Saudi Arabia increased production to 10.047 million barrels a day in November, the highest in at least three decades. The kingdom, the world’s biggest crude exporter, has the capacity to produce 12.5 million barrels a day and will pump about 9.9 million barrels a day this month and in April, al-Naimi told reporters at the Ritz Carlton hotel in the Qatari capital.
Saudi Arabia has excess capacity of 2.5 million barrels a day, the minister said, which makes up the bulk of spare capacity in the Organization for Petroleum Exporting Countries. As much as 1 million barrels a day of exports from Iran, the second-biggest OPEC member, may be lost as embargoes enforced by the U.S. and Europe hinder consumers from buying its oil, the International Energy Agency said in a report last week.
Brent crude reached a record $147 a barrel in 2008 as unused capacity in OPEC narrowed. As prices rose that year, Saudi Arabia said it could potentially raise output capacity to 15 million barrels a day, from 12.5 million barrels a day, using new oil fields if needed. Al-Naimi met with ministers from producing and consuming nations last week at the International Energy Forum in Kuwait.
“When I met with the ministers in Kuwait, every one of them mentioned the economy, and the impact of current prices, and the fear that we will have a repeat of 2008,” al-Naimi said. “The situation is completely different today to 2008. It is definitely not the same. There is plenty of supply, there is readiness to supply, and the demand is really not the one that is pulling.”
Brent crude traded at $123.85 a barrel on London’s ICE Futures Europe exchange at 6:04 p.m. London time Tuesday.
Market is Oversupplied
The global market is oversupplied by as much as 2 million barrels a day and inventories are rising, the minister said. Stockpiles in nations belonging to the Organization for Economic Cooperation and Development, were at 58.5 days worth of consumption last month and may reach 60 days this month, the Saudi minister said.
Oil supply disruptions in Yemen, Sudan and Syria are located in “miniscule” producers and total no more than 500,000 barrels a day, al-Naimi said. At the same time, OPEC members are boosting capacity. Libya will probably restore daily output to about 1.7 million barrels “very soon” and Iraq has commissioned facilities to export 900,000 barrels, he said.
In addition, Saudi Arabia’s overseas crude tanks are full and total about 10 million barrels, while local stockpiles are “significantly higher,” he said.
“Our inventories both in Saudi Arabia and worldwide are full,” the minister said. “Our Rotterdam inventory is full, our Sidi Kerir is full, our Okinawa is full. 100 percent full.”
U.S. and European sanctions cutting off transactions with Iran’s banking system intend to pressure the Islamic republic to abandon any nuclear weapons program. Iran says its atomic plans are for civilian purposes.
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