Oil Market Is `Well Balanced,' Saudi's Al-Naimi Says

By Maher Chmaytelli

Sept. 9 (Bloomberg) -- Saudi Arabia's Oil Minister Ali al- Naimi said the crude market is ``well balanced'' and inventories are in a ``healthy position,'' suggesting OPEC's biggest member will fend off calls from Iran and Venezuela for lower output.

``We have worked very hard since June's meeting to bring prices to where they are now,'' al-Naimi said as he arrived in Vienna before a scheduled meeting of the Organization of Petroleum Exporting Countries tonight. ``We have been very successful, I think everything is in balance.''

The opinion of Saudi Arabia, OPEC's most influential producer, differs from that of Iran and Libya, who want production to be trimmed back to official quota levels to prevent oil prices slipping below $100 a barrel because they say the market is oversupplied.

``From what we have heard they will come short of cutting production,'' said Eugen Weinberg, a commodity analyst at Commerzbank AG in Frankfurt. ``They are very satisfied with what is happening, the oil price is still above $100.''

New York oil futures slid 29 percent from a record $147.27 on July 11 as economic growth slowed, the dollar halted a three- year slide and Hurricane Gustav spared U.S. refineries. Most analysts polled by Bloomberg expect OPEC, the supplier of more than 40 percent of the world's oil, to keep quotas unchanged and production near record levels for the fourth quarter.

Exceed Quotas

The OPEC members with quotas produced about 592,000 barrels a day more than their official limit of 29.673 million last month, according to Bloomberg estimates. Iraq has no quota. Output from all 13 members slipped 200,000 barrels a day from July's record.

Most of the increase in OPEC production in the past few months has come from Saudi Arabia, the world's largest oil producer, which pledged to raise output by 500,000 barrels a day through June and July to calm prices. It hosted an emergency meeting of global oil producers and consumers in Jeddah in June to discuss how to stabilize markets. Saudi King Abdullah said oil prices above $100 a barrel were too high in an interview with Italian newspaper La Repubblica on July 16.

High oil prices are raising fuel costs for motorists, airlines and other businesses, spurring inflation worldwide in consuming and producing nations.

Asked whether he would recommend that the OPEC keep output at current levels, al-Naimi said today: ``We will do what I have said before, if we have customers we will satisfy their demand.''

Oil Slips

Oil futures fell after al-Naimi said supplies are sufficient to meet demand. New York crude oil for October delivery slipped as much as $1.57, or 1.5 percent, to $104.77 a barrel and traded at $105.44 as of 8:59 a.m. London time.

``Where Saudi Arabia is in this debate is crucially important; that is your linchpin,'' Jan Stuart, a global oil economist with UBS Securities LLC, said in a Sept. 5 Bloomberg Radio interview from New York.

The crude oil markets will be oversupplied by 1.5 million barrels a day in the first quarter if current production levels continue, Iran's Oil Minister Gholamhossein Nozari said yesterday, according to the country's state-owned news agency.

``We expect all OPEC members to produce their quota and control the supply into the market,'' Nozari told the agency.

OPEC President Chakib Khelil also predicts an oversupply of oil at the end of the year, and in early 2009, in the region of 500,000 to 1.5 million barrels of oil.

Khelil, who is also the oil minister of Algeria, told reporters in Vienna yesterday that ``all options are open'' including a production cut when the 13-member group holds its meeting.

Oil ministers from OPEC members Kuwait, Nigeria and Ecuador have said this week that the group shouldn't alter production.

To contact the reporter on this story: Maher Chmaytelli in Vienna at mchmaytelli@bloomberg.net