Saudi Arabia to lift oil supply, wants Opec to increase targets

Saudi Arabia is planning to lift oil output sharply this month in a bid to rein in high fuel prices, even if Opec fails to raise production targets. Riyadh plans to pump another 500,000 barrels a day to reach at least 9.5 million bpd, its highest output for three years, a senior Gulf industry official familiar with Saudi oil policy told Reuters.
--- Iran, Venezuela, Iraq oppose increase
Worried about the impact on economic growth of inflated energy costs, Saudi will act alone if necessary to keep a lid on prices now at $115 a barrel for benchmark Brent crude. The biggest producer in the Organisation of the Petroleum Exporting Countries, Saudi wants the group to lift formal output limits at a meeting on Wednesday to show consumer countries that it recognises the danger to the economy of oil over $100 a barrel. So far it only has the public support of its Gulf Arab allies Kuwait and the United Arab Emirates among the 12-member cartel.
"There is a need for more supply in the market," Kuwait's Oil Minister Mohammad al-Busairi told Reuters. "I expect Opec to increase output during this meeting but I am still unsure how much." The Gulf official said Saudi production was likely to average 9.5-9.7 million bpd in June. A Reuters estimate put output at 8.95 million bpd in May. Saudi output was last as high in the middle of 2008 after oil prices set a record $147 a barrel, shortly before recession sent prices crashing.
"This is a display from the Saudis that they have control," said Scott Niquist of consultants McKinsey. "Opec is very eager to have control over the market in the short term. There was a sense that the control that they had was lost." The extra Saudi supply won't all go for export. Direct crude burn at power plants to fuel summer air conditioning and higher refinery throughput for the return to service after maintenance of the Red Sea Rabigh refinery will soak up at least half the increment, Middle East analysts estimate.
Riyadh's production intentions may overshadow an Opec meeting which Gulf Arab producers want to restore credibility to the producer group's out-of-date supply limits. (For a graphic on Opec. The Gulf producers want, at least, to close the 1.4 million bpd gap between Opec's two-and-a-half year old official production limit of 24.8 million bpd and actual output, estimated by Opec in April at 26.2 million.
"The market will be tight," said UAE Oil Minister Dhaen al-Hamli. "I expect demand to be strong in the third and fourth quarter, the demand will mainly come from Asia," said Kuwait's al-Busairi. Price hawks Iran and Venezuela oppose any increase. Even if they can be talked around they will find it hard to swallow any increment other than enough to legitimise actual current output. Others too will need to be convinced. "In my opinion the current level is not too high," said Iraqi Oil Minister Abdul-Kareem Luaibi. "Recent indications from the oil market as far as the stocks and supplies is good - there is good supply."