Opec power Saudi Arabia assured Asian consumers on Wednesday of secure oil flows and predicted a drive towards energy efficiency would limit the need for future supplies. The world's top oil exporter is unlikely to raise its output capacity beyond 12.5 million barrels per day, but is on track to meet that target by the end of 2009, Saudi Oil Minister Ali al-Naimi said.
"Our feeling now with this thrust and push for conservation, efficiency and the use of alternatives is that we probably need not go beyond 12.5 million barrels per day," he said in Riyadh after a meeting of Middle East and Asian oil ministers.
The kingdom would analyse future demand growth once it reaches its 2009 production goal. Naimi said in September that increased energy efficiency could lead to lower investment by producers. Minimal spare capacity helped drive oil prices to a record near $80 a barrel last year.
The International Energy Agency (IEA), adviser to 26 industrialised nations, said it was not unduly concerned by the prospect of Riyadh capping its capacity expansion. "They can put in extra capacity very quickly if they want to," said William Ramsay, the IEA's deputy executive director. "They have the financial muscle and know-how to do it in three, four, five years."
ASIA LEADS A prolonged price rally that began in 2002 was also sparked by spectacular oil demand growth in China. Saudi's Naimi underscored Asia's role as a major consumer, saying the region would account for 70 percent of the world's future oil demand growth.
Prices have since fallen back to around $67 for benchmark Brent crude, but for some they are still too high. The Saudi oil minister reiterated that the market -- not producers or consumers -- sets the price of oil, but vowed the kingdom would keep up with demand.
"I would like to assure you that the importing Asian nations can depend on West Asia (Middle East) for future security and reliability of oil supply," Naimi said. Security of supply is a nagging worry for Asia, where economic expansion is leading to growing import dependence on the volatile Middle East. The region, home to 60 percent of the world's oil reserves, supplies Asia with 55 percent of its oil.
The price of oil was also high on the agenda at informal talks between top exporters such as Saudi Arabia and the United Arab Emirates and major consumers like China and Japan. Consumers have called on the Organisation of the Petroleum Exporting Countries to reverse some of the 1.7 million barrels per day cuts it agreed last year to help rebuild fuel stocks ahead of an anticipated demand surge in the third quarter.
STOCKS TOO LOW? The IEA's head said prices were too high and global fuel stockpiles too low. But he stopped short of calling on Opec to raise output.
"Oil stocks are not growing as much as they should at the moment, so there is not enough oil in the market," Claude Mandil, the IEA's executive director, said. "It is no secret we think the price is too high." Opec officials, however, said there was no need to review production levels until the next scheduled meeting in September.
The group's president, Mohammed al-Hamli, said market fundamentals were sound. "We do not look at the price. We look at the fundamentals of supply and demand and they are in good shape," he said. Opec Secretary General Abdullah al-Badri went further, saying there was no need for Opec to boost output this year.
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