SAUDI ARABIA is considering boosting oil production to its highest level in more than 25 years to bring down record prices and ease political pressure from the US and other developed countries.
The kingdom would complete the development of its giant Khursaniyah field soon, industry executives and diplomats said, increasing its output capacity by up to 500,000 barrels a day.
However, the Saudis have already hinted they would not bring that amount to market.
The kingdom has dismissed ideas that it would boost production all the way to 10 million barrels a day, up from the 9.45 million barrels it pumps at present - an amount that is already 300,000 barrels higher than last month.
UN secretary general Ban Ki-moon, who was visiting Saudi Arabia, yesterday said King Abdullah told him he viewed oil prices as "abnormally high".
Mr Ban said the Saudi leader was "willing to do what he could to bring the oil price to adequate levels".
But by acting unilaterally Saudi Arabia could cause division within the Opec oil cartel, many of whose members are unable to boost production.
After a series of hints by Gulf and industry officials in the past few days, oil traders now expect Saudi Arabia to announce a substantial increase in supplies when oil ministers meet in Jeddah on Sunday, although the announcement could come beforehand.
This has significantly upped the stakes of the hastily called summit, making it more likely that prices will rise from current levels if Saudi Arabia's actions fail to match expectations.
"Saudis are working on a massive increase in output capability and could announce it at Jeddah," an industry official said.
There is still a large degree of uncertainty about what exactly the world's biggest oil exporter will do, meaning oil prices are likely to be volatile this week.
Saudi Arabia may soon have the capacity to pump more oil, but how much it chooses to bring to the market remains unclear. As it brings Khursaniyah on line, it could ship all the extra barrels to market, or perhaps reduce output from some fields that produce less desirable heavy crude.
- (Financial Times service)
