RIYADH, (Reuters) – Top exporter Saudi Arabia said on Tuesday it expected oil prices, just off record highs, to hold firm “this decade” and reiterated it was willing to pump more crude to markets if needed.
Oil Minister Ali al-Naimi also said OPEC, the bulk of whose spare capacity lies with Saudi Arabia, will be able to meet expected growth in global crude demand but that the world will face a refining capacity crunch for the next four years.
“I believe oil prices during this decade will hold steady,” Naimi told a Euromoney conference in Riyadh, but did not give a price range and said price movements are hard to predict.
“As for the kingdom’s production, we are willing to increase it if there is a need and the new additions to production will be of light crude,” he said. The kingdom has been producing around 9.5 million barrels per day (bpd).
Oil held near $70 on Tuesday with U.S. light crude down 7 cents at $69.70 a barrel and London Brent up 12 cents at $70.33.
Naimi has said that prices above $70 are not in the interest of producers or consumers. U.S. oil prices hit record levels above $75 a barrel last month, partially due to worries over Iran’s standoff with the West over its nuclear ambitions.
The Organization of the Petroleum Exporting Countries (OPEC) supplies about a third of the world’s oil, but has been unable to rein in prices. It meets next on June 1 and several ministers have reiterated the cartel is powerless to bring down prices.
Naimi said Saudi Arabia’s surplus output capacity was 1.8 million bpd and would be built up over the next three years.
“Which means that it (the kingdom) is able to fulfil 50 percent of the expected increase in world oil demand by 2010,” he said.
“It is highly probable that the increase in demand for oil at the end of this decade will reach about 6 million bpd…I have no doubt that the oil producing countries, with the kingdom at the forefront, are capable of easily meeting this increase.”
Riyadh has embarked on a $50 billion drive to expand production and refining capacity. A trio of new oilfield projects will allow the kingdom to pump 12.5 million by 2009.
Consumer governments have urged major producers to inflate the global supply cushion stretched thin by the demand growth in Asia and the United States that sparked a four-year price rally.
OPEC in turn has said concern over shortages of oil products such as gasoline and diesel, due to a lack of global refining capacity, has played a big part in driving oil prices up.
“We believe the concern for the industry in the next four years will be whether there will be adequate global refining capacity…” Naimi said.
The minister called on consuming and producing nations to lift obstacles facing the refining industry, which lost investment over the last two decades due to declining returns and restrictions imposed by industrial countries.
“Despite the fact that there are several global projects to build new refineries or expand some existing refineries … these projects take a long time to complete,” he said, adding that existing refineries were old and needed to be modernised.
Naimi said state-run Saudi Aramco will boost refining capacity at home and abroad by 2 million bpd in the next five years — including building two new export-oriented domestic refineries with international firms and expanding the capacity of domestic and joint refineries in Riyadh, Yanbu and Jubail.
The minister said the kingdom’s Ras Tanura refinery will be upgraded with international participation to become a complex for refining and production of petrochemicals. “We hope to begin this development early next year,” Naimi said.