Saudi moves on oil pressure

Saudi Arabia moved last night to ease oil-price pressure saying it will hike its output to 9.7 million barrels a day the highest level in 27 years.

The statement came during a hastily arranged oil summit in Jeddah, which called for more investment in oil production and greater financial market transparency.

Leaders of 35 nations attending the summit agreed current record high oil prices are hammering the world economy.

Current prices and their volatility are detrimental to the global economy, and in particular the economies of least developed countries," the final communique of the summit said.

Though host Saudi Arabia, the world's biggest oil exporter, vowed to pump more oil in response to consumer countries' requests, it noted that an output boost will not suffice to calm a market driven by an array of factors.

Saudi Oil Minister Ali al-Nuaimi said the country's production capacity will rise to 12.5 million barrels per day by the end of next year and another 2.5 million bpd could be added if demand warranted.

Saudi King Abdullah promised US$500 million (HK$3.9 billion) in soft loans and called for a US$1 billion OPEC fund to help the world's poor cope with soaring prices that nearly hit US$140 a barrel last week.

The cost of crude has doubled in a year fueling inflation around the globe and sparking protests from Asia to Western Europe.

To curb the rising cost of fuel and food, the world's major central banks may start raising interest rates.

Concrete measures were unlikely to emerge from major producers, consumers and leading oil company executives gathered in Jeddah to reverse what some see as the world's third oil shock.

Recent efforts to slow oil's ascent have had little impact.

Saudi Arabia has vowed to raise production to 9.7 million barrels per day next month, its highest rate in decades.

King Abdullah said Riyadh was willing to provide all necessary oil supplies needed in the future, and blamed high prices on speculation and taxes.

Joining the chorus, Kuwaiti Oil Minister Mohammed al-Olaim said that OPEC members "will not hesitate" to increase production if the market needs it. But Algeria's Oil Minister Chakib Khelil insisted this was not necessary.

The meeting also highlighted the divide between those who say high oil prices are the result of soaring demand and slower growth in production and those, including most in OPEC, who see speculators as the primary force behind the rally.

Investment funds have pumped billions of dollars into oil and other commodities as they seek to diversify holdings and flee poorly performing asset classes, but US Energy Secretary Sam Bodman said the focus on speculation was misplaced.

"There's no evidence we can find that speculators are driving futures prices," he said.

US regulators, under political pressure from lawmakers, have stepped up oversight of futures markets.

Major oil consumers in Asia, including the world's No 2 user China, have recently raised cheap domestic fuel prices that analysts say aided rapid demand growth.

Fresh ideas appeared in short supply, with focus put on the importance of greater transparency in oil markets and more investment into renewable energy sources.

"There is the danger the markets will be disappointed and the price will increase again," said German Economy Minister Michael Glos. AGENCIES

Taken From :http://www.thestandard.com.hk