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.