Algiers (Platts)--19May2008

OPEC president Chakib Khelil said Monday that Saudi Arabia's plan to
boost its crude production by 300,000 b/d was a "sovereign decision" by the
oil producer group's most powerful member.

"The decision by Saudi Arabia to increase production is a sovereign
decision," Khelil told reporters, noting that the increase was meant to
compensate for declines in production from other members who have not been
able to meet their output targets.

Khelil said OPEC would not meet ahead of its next scheduled meeting on
September 9 but said member countries were holding consultations about the
market, which saw US light crude futures trade at a new record high of
$127.82/barrel last Friday.

"There will be no OPEC meeting before September," said Khelil, who is
also the oil minister of Algeria.

In September, he said, "we will study the market and if there is a need
to increase production we will increase. But I don't think there is a need to
increase production because global demand is falling."

Saudi oil minister Ali Naimi announced Friday that as a result of
increased demand, mainly from US customers, the kingdom had boosted production
by 300,000 b/d and would produce 9.45 million b/d in June.

The unexpected announcement came at a joint press conference with Saudi
foreign minister prince Saud al-Faisal following talks in Riyadh with US
President George W. Bush. One of the president's aims has been to secure
higher crude production from Saudi Arabia.

A transcript of Naimi's remarks published in Saudi newspapers on Saturday
had the oil minister saying that Saudi Arabia over the past several months had
compensated for reduced exports to the US from Venezuela and Mexico "to the
tune of 300,000 additional barrels/day."

"We will meet all requests for additional oil," said Naimi, who had
hitherto questioned if a need existed to put extra crude on world oil markets.

Khelil explained that some of OPEC's 13 members were unable to meet their
OPEC production targets so fellow producers with spare capacity were filling
the gap. Saudi Arabia said its production capacity is 11.3 million b/d and it
planned to raise capacity to 12.5 million b/d by the end of next year.

Bush, meanwhile, said he was "pleased" with the Saudi move but said it
would not be enough to resolve the US' energy problem.

"It's not enough. It's something, but it doesn't solve our problem,"
French news agency AFP quoted Bush as saying in Egyptian Red Sea resort Sharm
el-Sheikh.

IRAN SAYS SAUDI MOVE POLITICAL

Iranian oil minister Gholamhossein Nozari on Saturday dismissed the Saudi
move as political and said he saw no need for an OPEC production hike, saying
the weak US dollar rather than a shortage of supply in what he called a
saturated oil market was to blame for high oil prices.

"This action is more of a political move...it will only increase stocks,"
he said.

Asked if OPEC would raise oil output to help bring down oil prices, he
said: "No...the market is already saturated with oil and an increase in output
will not affect the price."

Iran, OPEC's second biggest producer, said last week that it was
considering cutting its production because of anticipated lower demand during
the refinery turnaround season and has been storing its crude on chartered
tankers.