Saudis and Russia pledge to prevent surge in oil price
By William Kay 06 January 2003 20:44
After a meeting in Riyadh yesterday, Saudi Arabia and Russia promised to keep their oil supplies running at a high enough level to prevent a potentially damaging jump in oil prices. This followed a pledge by Opec to increase production by up to a million barrels a day until the price has fallen from its present $30 (£18.75) a barrel to less than $28.
The oil price has risen strongly in recent weeks amid fears that a war in Iraq could disrupt exports throughout the Gulf, compounded by an industrial strike in Venezuela threatening supplies to the US.
"Both [Saudi Arabia and Russia] discussed the importance of stabilising oil prices and the necessity that they don't rise [to such an extent] that they affect global economic growth," said the Saudi oil minister Ali al-Naimi after meeting Igor Yusufov, the Russian energy minister. "The kingdom and Russia agree that co-operation is necessary to ensure that there is no lack of oil supplies." He added that oil markets were in bad shape and all producers had to co-operate to ensure a stable market.
Earlier, the United Arab Emirates oil minister, Obaid bin Saif al-Nasseri, said Opec would raise output if the price of its basket of crude oils remained above $28 until 14 January.
"Opec will increase its oil supply if prices remain above the higher level of the $22 to $28 price mechanism until 14 January. The hike will occur after consultation between members, who will determine the volume," he said, adding that Opec was not bound to increase supply by the 500,000 barrels per day level stipulated in the price band mechanism.
Opec has vowed repeatedly to fill any supply gap created by a possible US attack on Iraq.
Russian oil output is set to rise to an average 8.4 million barrels per day (bpd) this year, 800,000 bpd higher than the average last year. Russia does not belong to Opec.
Analysts say Moscow could easily move to 10.4 million bpd over the next few years and overtake Saudi Arabia, which pumped slightly more than eight million bpd towards the end of 2002.
Opec members are keen not to let Russia increase its market share at their expense.