Saudis Tell US They Can Stabilize Oil Prices
Posted: 23 May 2005
Saudi Arabian Oil Minister Ali Naimi assured U.S. officials Monday that the kingdom has enough spare production capacity to stabilize world oil markets.
In a lunch with U.S. Energy Secretary Samuel Bodman and Sen. Pete Domenici, R-N.M., head of the Senate Energy and Natural Resources Committee, Naimi said he was more concerned about a lack of refining capacity, Domenici told reporters after the meeting.
"They are confident about being able to stabilize, but nothing specific," Domenici said.
The Saudis "see a very genuine need for new refining capacity," the senator said. "They had a lot of production of oil, but it needs refining capacity. There are a lot of inventories of oil, but we don't have the capacity to use it. Sometimes we are talking around the problem."
Saudi Crown Prince Abdullah made similar comments last month when he met with U.S. President George W. Bush in Crawford, Texas.
Concerns about whether OPEC - already near capacity - can produce enough oil to meet demand if it rises sharply as expected later this year have underpinned the long rally in oil prices.
Monday's meeting comes as a Saudi-led move by the Organization of Petroleum Exporting Countries to boost output this spring has succeeded in building up oil inventories and pushing down prices, which in New York are more than $10 below their April 4 peak.
But the meeting also follows a Saudi decision earlier this month to raise the price of crude sold to the U.S. in June, a move traders interpreted as a signal the Saudis feel they can ease back on the taps. Saudi industry sources point out that U.S. refiners have turned down their offer of incremental supplies since March.
Asked if the U.S. pressed him during the meeting to boost Saudi oil production further, Naimi replied: "Aren't we doing that?"
Saudi Arabia has agreed to invest some $50 billion to boost crude oil production to 12.5 million barrels a day by 2009 and plans to build new refineries in the kingdom as well as upgrade existing ones.
Last year during a visit to the U.S., Naimi said the kingdom was willing to build two new refineries in the U.S. He's since dropped the proposal. Political and environmental hurdles have meant that there have been no new refineries built in the U.S. in nearly 30 years.
Domenici said Naimi also had questions about the long-stalled U.S. energy bill.
"We discussed everything that has to do with the world situation and America's situation - about oil, refined products, the future. They are wondering about when we are going to get an energy bill," Domenici said. "He didn't ask for anything in the bill. He just wanted to know when we are going to get one."
Naimi and Bodman are scheduled to address a conference at the Center for Strategic and International Studies Tuesday. (2005 Dow Jones Newswires)
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