Oil promised by Saudi Arabia is coming to the market soon

Jul 07, 2000 02:00 AM

An extra 500,000 barrels of oil promised by Saudi Arabia is coming to the market soon, a Gulf oil official said. The prospect of more oil has sent crude oil prices lower.
Saudi Arabia will provide the majority of the new oil but other producers of OPEC will participate in the production increase, the official said. He said Saudi Arabia is in intensive consultations with the OPEC producers participating in the increase to decide how much extra oil they will add and exactly when to do so. Non-OPEC Mexico also will add oil to the market, he said.
OPEC countries unwilling or incapable of taking part in the production increase will lose their share to others, the official said. He would not say which other OPEC producers would participate in the production increase, and would only say that the oil would be on the market "very soon." The comments are an indication Saudi Arabia is serious about its pledge that it soon will increase output by 500,000 bpd to cool prices that had been around $ 30 -- and that the oil giant is willing to act with or without an OPEC consensus.

There had been scepticism the Saudis would carry through with their pledge after no new oil was seen on the market and many OPEC members criticised the Saudi comments. The 10 other OPEC members reacted with anger and disbelief after Saudi Arabia said it would add about 2 % to the cartel's official output of 25.4 mm bpd, saying they had not been informed and that an OPEC consensus was needed.
Except for Kuwait and the United Arab Emirates, no other OPEC members have enough surplus capacity to quickly raise their production levels.
Saudi Arabia has excess production capacity of 2.3 mm bpd in addition to its current quota of 8.25 mm, Saudi oil officials have said. The Saudis announced their intention to hike production after it became clear that an increase of 708,000 bpd agreed on by OPEC oil ministers was not enough to drive down prices.
With the United States and other importers demanding relief, the Saudis want to opentheir taps further in hopes of trimming the price of the OPEC basket of seven different crudes to a more sustainable $ 25. The OPEC crude basket price was $ 28.92.
Saudi Arabia is a key ally of the United States, the world's largest oil consumer.

Source: AP
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