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Saudi ready to pump 12.5 mn bpd oil if needed: source

Sunday, 10 April 2011

11 April 2011;business-standard.com:Dubai: Top oil exporter Saudi Arabia would have "no problems" producing at its claimed 12.5 million barrels per day (bpd) capacity if the market needed the oil, a senior Gulf source told Reuters on Sunday. The official dismissed doubts raised by some analysts over the kingdom's stated spare capacity as the work of speculators trying to manipulate oil prices as fighting in Libya has disrupted production in the North African OPEC nation. "First traders used the peak oil theory to drive the market up and since that didn't work now they are saying that Saudi can't use its full capacity, which is completely not true," the senior Gulf source said. OPEC's spare capacity, which is mainly held by Saudi Arabia, has returned to the forefront of oil traders' minds with the unrest in Libya. Although the consensus is that the remaining idle OPEC oil fields can pump more than 3 million bpd, another significant output disruption would leave a razor-thin margin between world oil demand and production capacity. Oil posted its biggest rise in three weeks on Friday, gaining $3.98 to settle on Friday at $126.88 a barrel, its highest since July 2008. Oil consumers warned last week that their economies were being harmed by soaring energy costs. "The market is reacting to misinformation, there is no reason for the price to be at this level," said the source. "We have no problems in reaching our full capacity, we are completely capable of it if its required," said the source. OPEC ministers have blamed speculators for the price rise and said there is little the producers' group can do to rein in prices as the market is currently well supplied. State oil monopoly Saudi Aramco's reported plans to boost the number of rigs drilling wells in the kingdom to 118 from around 92 at present has further stoked speculation about Saudi Arabia's oil output capacity. Aramco discussed increasing the number rigs during meetings with leading oil services companies including Halliburton Co, Simmons & Co analyst Bill Herbert said in a research note released last month last month. "The rigs are for maintaining capacity and other activities like gas exploration, but its not at all a sign that we can't produce 12.5 million barrels a day," the Gulf source said. Saudi Arabia has claimed a sustainable production capacity of 12.5 million bpd since Aramco completed several expansion projects in 2009. Riyadh has traditionally maintained the bulk of OPEC's spare capacity as part of its oil policy.