Saudis set to raise oil output

2008-6-15  |     NEWSPAPER EDITION

SAUDI Arabia plans to increase its oil output next month by about a half a million barrels a day - a sign the country is growing concerned about the impact of high crude prices on the global economy, The New York Times reported yesterday.

Citing analysts and oil traders briefed by SAUDI officials, the Times said the plans by the world's largest oil exporter had been privately disclosed recently by SAUDI officials. The analysts declined to be identified for fear of being cut off from information from the Saudis in future.

"We would welcome any and all increases in oil production, including from SAUDI Arabia," White House spokesman Tony Fratto told the newspaper. US President George W. Bush pressed for increased production in two visits to SAUDI Arabia earlier this year.

Ibrahim al-Muhanna, an adviser at the SAUDI Petroleum Ministry, declined to comment on the production increase, the Times said, although he noted SAUDI Arabia was uncomfortable with oil prices, saying, "Our goal is to bring back stability to the oil market."

The increase, which the Times said may be made public in the next few days, could put the Saudis' output at 10 million barrels a day, which would be its highest-ever output if sustained, the Times said. The current level is 9.45 million barrels daily.

The move was seen as an indication SAUDI Arabia was nervous about the political and economic impact of higher oil prices, the report added, with oil demand dropping in developing countries, including the US.

Oil prices have risen 40 percent to nearly US$140 a barrel this year, causing record US gasoline prices. Some analysts have forecast US$200 a barrel prices this year.

"This clearly represents the biggest test for them," John Kilduff, a senior vice president at the brokerage firm MF Global, told The Times, saying, the move could backfire if investors fail to respond to the extra supplies.