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Saudi Arabia increases oil output after UN pressure

Times Online
June 16, 2008

Saudi Arabia increases oil output after UN pressure

Saudi Arabia has offered to increase oil production, as the world’s biggest oil exporter moves to address global fears that prices are spiralling out of control, it emerged yesterday.

The Kingdom, an influential Opec member and a huge force in world oil production, is prepared to raise output by 200,000 barrels a day next month in response to requests from customers, according to Ban Ki-Moon, United Nations Secretary-General.

The UN chief said that Saudi Arabia had already increased production for June by 300,000 barrels a day.

The increase would mean that production would hit ten million barrels a day in Saudi Arabia, which has reaped record profits on the back of surging prices.

Oil has edged towards $140 a barrel in recent weeks, stoking fears of global inflation and sending prices on British forecourts to fresh highs. Some economists have suggested that prices could reach $250 a barrel.

The move by Riyadh suggests that Saudi Arabia may be worried about the potential economic and political fallout from the dramatic increases in fuel costs. As well as dampening growth in leading world economies, prices this high are bound to lead to a fall in demand eventually.

“The Saudis have been responsibly reacting to requests from their customers,” Mr Ban said.

Tokyo-based commodities traders are predicting a volatile few days for oil after the chairman of the Group of Eight leading industrial nations admitted at a two-day conference in Osaka, Japan, that finance ministers in the world’s wealthiest nations did not fully understand what had driven the price of crude to such highs.

There have been significant disagreements during the past few weeks over the true cause of high oil prices. Some have blamed market speculation and a flood of capital into oil futures’ markets.

Henry Paulson, the US Treasury Secretary and Alistair Darling, the Chancellor, were keen to play down that suggestion. However, Giulio Tremonti, the Italian Finance Minister, said what he called “enormous speculation” was behind high prices. The fog of official understanding, combined with G8 demands that the world’s oil producers relieve the pressure by raising output, is expected to cause uncertainty on energy markets.

Currency trading against the US dollar is also primed for an “explosive” week, after G8 finance ministers rallied behind calls for a stronger greenback. Mr Paulson said after the talks at the weekend that “a strong dollar is in our interest”.

Alexei Kudrin, the Russian Finance Minister, said that the weaker dollar was one of the big reasons for the rise in the oil price.

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article4143531.ece

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