Middle-east Arab News Opinion | Asharq Al-awsat

Saudi says keen to avoid US global recession - ASHARQ AL-AWSAT English Archive 2005 -2017
Select Page
Saudi King Abdullah bin Abdul Aziz al-Saud (R) talks with Emir of Kuwait Sheikh Sabah al-Ahmed al-Sabah at the OPEC summit in Riyadh, 18 November 2007 (AFP)

Saudi King Abdullah bin Abdul Aziz al-Saud (R) talks with Emir of Kuwait Sheikh Sabah al-Ahmed al-Sabah at the OPEC summit in Riyadh, 18 November 2007 (AFP)

WARSAW (Agencies) – OPEC wants to avoid a situation in which record high oil prices would help push the global economy, particularly that of the United States, into recession, Saudi Oil Minister Ali al-Naimi was quoted on Monday as saying.

In an interview for the Polish daily Rzeczpospolita, Naimi reiterated his recent comments that the market, not the Organization of the Petroleum Exporting Countries (OPEC), had the biggest influence on oil prices and called concerns about oil supply “unwarranted.”

“I want to stress — Saudi Arabia’s production capacity is enough to meet an increase in demand for oil,” he was quoted as saying in the interview, conducted during the weekend’s summit of OPEC heads of state.

He said the summit was not a place to decide on output increases.

“However, I cannot stress enough — we don’t want to allow a situation in which there is a recession in any country in the world, least of all the country which is the biggest importer of oil (the United States).”

Saudi Arabia is the world’s top oil exporter and it has traditionally assured the West of easy oil supplies through its status as the “swing producer” in OPEC.

OPEC ministers meet on December 5 to discuss output levels. Crude prices hit an all-time record of $98.62 a barrel on November 7.

Oil prices rose Monday as some OPEC members talked about converting their cash reserves to the Euro and away from the “worthless” U.S. dollar. There is also doubt a possible OPEC output hike next month would get more supplies to market in time for the northern winter.

Oil is priced in U.S. dollars and the currency’s depreciation has concerned oil producers because it has contributed to rising crude prices and has eroded the value of their dollar reserves. Cartel officials have resisted pressure to increase oil production to ease prices.

“The fact that the OPEC members are talking about issues like the weak U.S. dollar and not talking about raising output is supportive of strong pricing and so we’re seeing signs of the market gaining strength,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Light, sweet crude for January delivery rose US$1.15 to US$94.99 a barrel in Asian electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract rose US$1.77 to settle at US$93.84 a barrel on Friday.

Calling the U.S. dollar a “worthless piece of paper,” Iranian President Mahmoud Ahmadinejad said Sunday in Riyadh, Saudi Arabia, the cartel’s members have expressed interest in converting their cash reserves into a currency other than the U.S. dollar, a sentiment echoed by Venezuelan President Hugo Chavez, who called the Euro a better option.

There had been speculation over whether OPEC would raise production at the meeting following recent oil price increases that have closed in on US$100 a barrel. U.S. Energy Secretary Samuel Bodman had called on OPEC to raise output last week, but cartel officials say they will hold off any decision until the group meets next month in Abu Dhabi in the United Arab Emirates.

Some analysts say a decision to increase output next month is unlikely to strengthen supplies to meet peak winter demand season.

“Even if the OPEC ministers decide to raise output in early December, that would likely become effective only in January so by the time the oil gets to the market, the winter season would essentially be over,” Shum said.

OPEC officials have also cast doubt on the effect any output hike would have on oil prices, saying the recent rise has been driven by the falling dollar and financial speculation by investment funds, rather than any supply shortage.

In London, January Brent crude futures added 92 cents to US$92.54 a barrel on the ICE Futures exchange. In other Nymex trading, heating oil futures gained 2.84 cents to US$2.6155 a gallon (3.8 liters) while gasoline futures added 2.66 cents to US$2.4020 a gallon. Natural gas futures jumped 7.7 cents to US$8.078 per 1,000 cubic feet.

Saudi Oil Minister Ali al-Naimi gestures during a press conference in Riyadh, 18 November 2007 (AFP)

Saudi Oil Minister Ali al-Naimi gestures during a press conference in Riyadh, 18 November 2007 (AFP)

Iranian President Mahmoud Ahmadinejad (L) stands next to his Venezuelan counterpart Hugo Chavez (R) during the closing ceremony of the OPEC summit in Riyadh, 18 November 2007 (AFP)

Iranian President Mahmoud Ahmadinejad (L) stands next to his Venezuelan counterpart Hugo Chavez (R) during the closing ceremony of the OPEC summit in Riyadh, 18 November 2007 (AFP)