Saudi Arabia reiterates support for two-stage OPEC ceiling hike

Saudi Arabia reiterates support for two-stage OPEC ceiling hike

Vienna (Platts)--15Jun2005


Saudi oil minister Ali Naimi reiterated Wednesday that he backed a plan for
OPEC to increase its crude output ceiling by as much as 1-mil b/d in a
two-stage effort to lower oil prices. "You have one supporter here," Naimi
said, asked to comment on the two-stage increase OPEC ministers will discuss
later Wednesday in the Austrian capital. 

Naimi had already said Tuesday that there was "nothing wrong with 28.5-mil
b/d," the level to which OPEC's official ceiling could rise eventually if the
plan is adopted. The proposal, which OPEC president Sheikh Ahmed Fahed
al-Sabah said came from Nigeria, late Tuesday won the backing of OPEC's
Ministerial Monitoring Committee which is set to recommend it to the full
conference later Wednesday. The proposal would see OPEC's current 27.5-mil b/d
ceiling rise by 500,000 b/d to 28-mil b/d July 1, and, at some later stage, by
a further 500,000 b/d to 28.5-mil b/d if warranted after consultations led by
OPEC president Sheikh Ahmed.

Sheikh Ahmed said late Tuesday that the trigger for kicking off consultations
on the second increase could be the OPEC crude basket staying above $50/bbl
for 7-10 days. The basket stood at $50.83/bbl Monday. US light crude futures
closed at $55/bbl Tuesday in New York, within striking distance of the
$55.28/bbl all-time high traded April 4. Raising OPEC's ceiling by 500,000 b/d
to 28-mil b/d will not put new barrels on world oil markets, as the ten
members with quotas already exceeded that volume in May by some 200,000 b/d,
according to a Platts survey earlier this month. Most OPEC countries are
pumping at their limits, leaving Saudi Arabia as the only producer with the
capacity to boost output significantly. Naimi says the kingdom is currently
producing 9.5-mil b/d and has 1.5-mil b/d of spare capacity, which it is
prepared to tap if there is demand for it. But Naimi has insisted that there
is currently no demand for extra Saudi barrels because they consist mainly of
heavy crude which the global refining system cannot profitably process.

This story was originally published in Platts Global Alert
http://www.globalalert.platts.com

Please visit: www.platts.com

Their coverage of energy matters is extensive!!.