Oil rises above US$80, Saudi Arabia plans output increase

Oil prices fell more than 2.5 per cent today after Saudi Arabia indicated it was ready to pump more crude to meet any shortfall resulting from America's sanctions on Iran.

The surest sign is the reassurance given by energy minister Khalid al Falih yesterday that Riyadh has no intention of deploying an oil embargo in defence of its interests.

"Equities are weighing on oil prices", said UBS Group AG analyst Giovanni Staunovo. "But Saudi Arabia is a very responsible country, for decades we used our oil policy as (a) responsible economic tool and isolated it from politics", al-Falih said.

USA crude fell US$3.17, or 4.6 per cent, to US$66.19 a barrel, after hitting a session low of US$65.74, the lowest level since August 20.

Zanganeh noted that higher oil prices would strongly affect the global economy. Shipping brokerage Eastport on Tuesday said crude prices were "widely expected to decline in coming months, as rising production in the United States offsets increasing global demand".

Despite this, Sukrit Vijayakar, director of energy consultancy Trifecta, said "markets are. tired of the impact of USA sanctions on Iran's oil sector", estimating the sanctions "could impact up to 1.5 million barrels per day of supply". Saudi Arabia must put in place measures to ensure something like this can never happen again.

South Africa has, so far, maintained an aloof silence, which is understandable given our country's interest in, and relations with, Saudi Arabia. We work to stabilize global markets and facilitate global economic growth.

Will limit oil supply next year if there was need. "So we have to use oil reserves". The US is expected to become the largest oil producer in the world next year, according to the International Energy Agency.

"We will decide if there are any disruptions from supply, especially with the Iran sanctions looming", Falih said.

"The big unknown is how much Iranian oil will be off the market and we'll know in about a month's time".

India-the world's third-largest oil importer and the second-biggest oil customer of Iran-is unlikely to see a long-term impact on its oil import bill from the USA sanctions on Iran's oil coming into force in less than two weeks, Frank-Jürgen Richter, chairman of independent think tank Horasis, told the Times of India. He added that Riyadh had capacity to increase output to 12 million bpd and its Gulf OPEC ally, the United Arab Emirates, could add another 0.2 million bpd.

  • Eleanor Harrison