Saudi Arabia has assured the United States that it will supply up to 2 million barrels a day in additional crude oil if the market demands it, the U.S. Energy Secretary said Sunday.
Saudi Arabia has pledged to pump an additional 600,000 barrels a day starting in June, lifting its total daily output to 9.1 million barrels, Energy Secretary Spencer Abraham told a news conference at an Amsterdam hotel after meeting privately with Saudi Oil Minister Ali Naimi.
“He also stated that going forward they will meet all requests up to their full capacity of 10.5 million barrels a day. I think this was a very important comment on his part,” Abraham said.
Abraham said he expected the new Saudi commitment would help reassure oil markets about the reliability of supplies.
Soaring oil prices
Oil prices have soared above $40 a barrel in recent weeks due to fears about instability in Iraq and other oil-rich Gulf countries, bottlenecks in gasoline production at U.S. refineries, and an unforeseen burst in global demand, particularly from China and the United States.
The 11-member Organization of Petroleum Exporting Countries, which supplies about a third of the world’s crude, has come under intense pressure from the United States and other oil-importing countries to boost output to calm markets and reduce prices. Saudi Arabia is OPEC’s most influential member, and it alone has significant unused capacity to pump more oil quickly.
Abraham met with Naimi during a three-day conference of energy producing and consuming nations.
The Saudi Oil Ministry proposed Friday that OPEC increase its production ceiling by 2 million barrels a day, or 8.5 percent. At the same time, it pledged to raise its own output to at least 9 million barrels in June.
OPEC defers decision
Although OPEC expressed concern about the sharp rise in oil prices, it announced Saturday that it was deferring a decision about increasing its ceiling until it meets June 3 in Beirut, Lebanon.
Naimi’s assurances to Abraham were the most explicit Saudi commitment to produce at this higher level since oil prices reached the psychologically important threshold of $40 a barrel.
Speaking afterward, Iranian Oil Minister Bijan Namdar Zangeneh said he acknowledged Saudi Arabia’s right to take independent action if it believes it’s necessary. However, Zangeneh emphasized that it is important for OPEC to reach consensus as a group on oil production levels.
“In the short term, it’s probably necessary to send a positive signal to the market,” he told reporters.