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Saudi oil output increase set to be wiped out by Nigeria crisis

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Saudi oil output increase set to be wiped out by Nigeria crisis

By Carola Hoyos and Andrew England in Jeddah

Published: June 23 2008 03:00 | Last updated: June 23 2008 03:00

Saudi Arabia’s decision to pump more oil than it has in nearly 30 years risks being more than outweighed by the sharp drop in output caused by attacks on production facilities in Nigeria.

Nigeria now pumps less than 1.5m barrels a day, its lowest level in 25 years, rather than the 2.5m b/d it has the ability to produce, according to officials attending a high-level meeting yesterday in Jeddah.

The hastily convened conference of consumers and producers, as well as energy ministers and oil company chief executives from around the world, is likely to be seen as a disappointment because it yielded little more than had been expected from the world’s largest exporter in spite of global concerns that developing countries were cracking under the burden of record oil and food prices.

For long Africa’s largest producer, Nigeria recently fell to second place behind Angola, crippled by attacks by militants. On Thursday a Chevron pipeline was hit, curbing its output by 120,000 b/d, and Royal Dutch Shell said it could not promise to deliver 225,000 b/d for June and July after a raid on its Bonga field.

Saudi Arabia confirmed it would pump 9.7m barrels a day next month, an increase of 200,000 and the highest level in nearly 30 years, as it repeated its standard offer of extra barrels if customers demanded them.

Ali Naimi, Saudi Arabia’s energy minister, gave no timeframe for putting the five projects needed to provide the additional 2.5m b/d on line, saying that if there was a “general need” each one could be on stream in around three years.

Saudi Arabia’s spare capacity is now estimated at 1.5m b/d, the lowest in a generation, but as it pumps more oil into the market, that cushion shrinks. The fear that the kingdom’s extra oil might not be enough is one element that drove oil prices to a record $139.89 last week – double what they were a year ago.

Robert H Laughlin, of MF Global in London, said oil ministers have attempted to put a brave face on the outcome of the summit. “I fear this may turn out to be an understatement especially when you take into account the recent losses from Nigerian production which wipes out any fresh oil offered by the Saudis,” Mr Laughlin said.

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