Saudi Arabia pumps oil at highest level for decades

Saudi Arabia said on Wednesday it was pumping at its highest rate for decades in a signal a week before a key Opec meeting that it intends to meet demand with more output if necessary. The announcement, which was greeted with some scepticism by analysts, comes at a time when the European Union is discussing imposing a ban on oil from Opec member Iran, a move that could put further upward pressure on oil prices in some markets.
A senior Saudi oil official told Reuters the Kingdom produced 10.047 million barrels per day (bpd) of crude oil excluding condensate in November, well above previous estimates. "Saudi Arabia's production has been fluctuating this year. It has reached over 10 million barrels (per day) in November excluding condensate because consumer demand was higher," the official said.
A Reuters survey of Opec output last month estimated Saudi crude oil supply in November at 9.45 million bpd, up from 9.40 million bpd in October and 8.25 million bpd in November 2010. The Organisation of the Petroleum Exporting Countries (Opec) meets in Vienna on December 14 to discuss production policy.
Analysts responded cautiously to the Saudi output figure, interpreting it as a signal to fellow Opec members that oil demand was high and output should not be restricted. "This is the highest output since 1980," said Michael Poulsen of Global Risk Management. "All the extra produced oil is either consumed in the Middle East or on eastbound ships to feed the roaring Asian dragons."
Harry Tchilinguirian, analyst at BNP Paribas, said Saudi Arabia had never produced 10 million bpd in the last decade. "We do not buy that number," Tchilinguirian said. "This may simply be case of the usual pre-Opec meeting build-up in communication where Saudi is showing its strength as the main holder of spare production capacity."
Opec delegates say the cartel's Vienna-based secretariat will recommend it agree an output target of 30 million bpd for the first half of 2012, above anticipated demand for Opec crude of 29.9 million bpd in the first quarter and 28.7 million bpd in the second quarter.
Adopting such a high output target, a policy likely to be supported by Saudi Arabia, would allow oil stocks to build and help restrain oil prices, which have been at historic highs. North Sea benchmark Brent crude futures have averaged close to $110 a barrel this year, a record high and a level that economists say may damage global economic growth.
Opec's leading price hawk, Iran, appears to have given up its campaign to have Gulf Arab nations including Saudi Arabia cut back supply. Iranian Oil Minister Rostam Qasemi told Reuters on Monday that Tehran would be guided by the Opec secretariat.
Iran's change of heart appears to reflect a desire to avoid a second meeting this year under its chairmanship, as holder of Opec's rotating presidency, that fails to secure a supply pact. An Opec meeting in June failed to agree a deal for the first time in decades. Opec producers have said any restrictions on oil supply, including a ban on Iranian oil being discussed by the European Union, could push up prices.
Standard Bank oil analyst James Zhang said Saudi Arabia's willingness to supply the market had been helping keep oil prices in check over the last year. "The flip side of the situation is that Saudi's spare capacity is diminishing fast, which could mean increased impact from supply disruptions in the future," Zhang said.
Opec Secretary General Abdullah al-Badri said on Wednesday Iranian oil supplies to Europe would be difficult to replace. "I really hope there will be no embargo from the EU, Badri said. "It would be very difficult to replace." EU members take more than 600,000 bpd of Iranian oil, approaching a quarter of the Islamic Republic's exports, Internationnal Energy Agency data show.