Saudi and UAE taps opened to offset price surge

Reporting its crude output to the Riyadh-based Joint Oil Data Initiative (Jodi), an official oil information-gathering organisation comprising nearly 100 producers and consumers, Saudi Arabia said it pumped 9.204 million barrels per day in January.

The output was almost equivalent to its December production but higher by nearly 200,000 bpd over its November output of 9.029 million bpd. It was also about 400,000 above its average output of 8.814 million bpd during 2007, according to the figures provided by the Saudi Oil Ministry.

Riyadh’s decision to raise output came after oil prices began climbing fast in December before surging above $100 in January. They slumped below that level in the following weeks but have again shot above $100.

Strong demand has allied with Opec’s reluctance to increase crude supplies and other factors to push oil prices up by nearly 30 per cent since September.

At its meetings in Vienna in February and March, Opec twice said it would keep crude oil production unchanged despite the price surge on the grounds there are enough supplies in the market and the price rise was caused by speculation.

Saudi Arabia, the leader of the 13-nation Opec and the world’s top crude exporter, has shown over the past few months that it still plays the role of a swing producer it adopted in the 1990s, albeit to a lesser extent. Such a role was evident in the persistent fluctuations in its oil production during 2007 and the recent surge in output.

“Saudi Arabia still has the potential to play that role as it is the only oil producer in the world with enough spare capacity to influence the market,” a Gulf Arab oil analyst said. “I believe Saudi Arabia does not want very high prices and is seeking to curb their increase through quiet output hikes rather than a noisy Opec decision to raise the ceiling as this might depress prices sharply.”

In its report to Jodi, the UAE said it pumped as much as 2.700 million bpd in January compared to an average 2.532 million bpd in 2007. The January output remained far below the country’s sustainable capacity.

Kuwait, another major Opec member, boosted output to 2.606 million bpd in January from 2.587 million bpd in December while Iran’s production was also as high as 4.100 million bpd compared to below four million bpd through 2007.

Qatar, a relatively small oil producer but the world’s largest LNG exporter, reported a sharp rise in its crude output to 864,000 bpd in January compared to about 792,000 bpd in December. There was also an increase in Venezuela’s production to 3.079 million bpd from 3.01 million bpd.

Jodi said no figures were available for February but estimates by the Nicosia-based Middle East Economic Survey showed Saudi Arabia’s output remained unchanged at 9.2 million bpd, indicating it views prices as too high.

In its report for March, the London-based Centre for Global Energy Studies, which is owned by former Saudi oil minister Sheikh Ahmed Zaki Al Yamani, said it expected oil prices to remain high unless there is a slackening in Asian demand, mainly in China.

“Despite such record high prices, oil demand growth remains strong in key Asian countries. There are signs, though, that China’s exports growth is slowing as consumers in the industrialised world lose confidence. Should its exports begin to contract, China’s growth will slow and Asia’s incremental oil demand will moderate, triggering a change in direction for oil prices,” it said.

At current prices, Opec is projected to net its highest income of $863 billion in 2008, higher than the 2007 record revenues of $675bn, according to the Energy Information Administration of the US Energy Department.