Saudis to lift production as oil hits $127

Daily Telegraph: Saudis to lift production as oil hits $127

By James Quinn, Wall Street Correspondent

The price of oil soared to yet another record high as President George W. Bush’s second trip to Saudi Arabia in four months appeared to deliver a token victory in the battle for increased oil output.

In New York, the price of a barrel of oil for June delivery touched a new high of $127.82, spurred on by investment bank Goldman Sachs predicting the average price of barrel a oil will be $141 in the latter half of the year.

Early indications from President Bush’s meeting with King Abdullah of Saudi Arabia suggested the US leader received largely the same reception as he did when he visited the oil-rich Middle Eastern kingdom in January.

White House aides, including US National Security Adviser Stephen Hadley, said immediately after the meeting of the two leaders that King Abdullah again pledged to keep pumping as much oil as needed to meet demand, but said that he sees no unmet current demand.

However, later Saudi oil minister Ali ai-Naimi said that on May 10, the kingdom had increased its oil output by 300,000 barrels on the request of “about 50 customers worldwide.”

The rise will bring Saudi’s production in June to 9.45m barrels a day, and does not appear to have been granted in direct response to President Bush’s visit. “In the future, if the need appears, Saudi Arabia has no objection to producing more,” added Mr al-Naimi.

Ahead of his one-day visit to the Middle Eastern kingdom, President Bush had hoped that as the world’s largest supplier of oil, accounting for approximately 10pc of global oil output, King Abdullah might be persuaded to act as a catalyst to encourage others in OPEC cartel to also pump more oil.

Mr al-Naimi said that the decision to increase production by a further 300,000 barrels was purely in response to other OPEC nations decreasing their own production.

The US leader is keen to reduce the cost of oil due to America’s heavy reliance on petrol, with both the general public and the business community feeling the pinch as a result of ever higher prices at the pump.

“We do count on the OPEC countries to keep adequate supplies out there,” admitted White House spokeswoman Dana Perino. “We have had sluggish growth; with lower oil prices we could certainly have better growth.” Meanwhile oil analysts at Goldman Sachs provided little comfort, forecasting that the average price of a barrel of US crude oil will average $141 in the second half of 2008, against its earlier forecast of $107.

Goldman, the most active of the investment banks in the energy markets, also raised its average price projection for 2009 to $148 a barrel.

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