Oil summit needs to get results, says US
Saturday, 14 June 2008
FT Reporters Carola Hoyos in Tripoli, George Parker and Javier Blas in London and Andrew England in Riyadh, FT Syndication Service
The US warned last Thursday that a hastily called weekend oil summit needed to produce concrete results as the world economy suffered the impact of a recent surge in global crude prices.
Stephen Hadley, the US national security adviser, said: "Expectations ... have been generated and it is important that those expectations [are met]."
Gordon Brown on Thursday became the first world leader to sign up for the summit, to be held on June 22 in the Saudi Arabian port city of Jeddah.
The prime minister has been a sharp critic of the Opec oil cartel, of which Saudi Arabia is the most powerful member. He has called the operation of the group "scandalous".
Such criticism - especially from Group of Eight (G-8) energy ministers last weekend - was the impetus for King Abdullah, Saudi Arabia's leader, to call the meeting, diplomats said.
Ibrahim al-Muhanna, a spokesman for Saudi Arabia's energy ministry, said: "We have realised that oil prices really have increased to unjustifiable and unreasonable levels."
He said this could have a "negative impact on the global economy, especially the economies of the developing countries and it might even have a negative impact on the oil industry in the long term".
But the decision to call a meeting was fraught with risk, said western diplomats. "If nothing concrete and convincing [in terms of new investment or new supplies] comes out of the meeting, it could hit back both Saudi Arabia and the oil market [pushing prices higher]," said one envoy.
To fulfil those expectations Saudi Arabia could announce increased production from its Khursaniyah oilfield, whose development was close to complete, diplomats and oil industry officials said.
This could raise production by as much as 500,000 barrels of oil a day from the current level of 9.45m b/d. However, such a move would undermine Riyadh's argument that high oil prices are fuelled by speculators and the weakness in the dollar, not by a lack of supply.
It is also far from clear whether oil prices would fall significantly on the news because the field's development is well known.
When Saudi Arabia recently offered an extra 300,000 barrels a day, the market shrugged off the news and continued to rise, reaching almost $140 last week.
Shokri Ghanem, chairman of Libya's national oil company, warned there was little Opec could do at the meeting, for which he said he had yet to receive an invitation. "Prices have nowhere to go but higher. The age of two-digit oil prices is over, it will always be three digits," he said in an interview.
"Opec can do nothing. Opec is reaching its peak production and there is no more that countries can produce. They are squeezing their rocks as hard as they can," he added.
The US warned last Thursday that a hastily called weekend oil summit needed to produce concrete results as the world economy suffered the impact of a recent surge in global crude prices.
Stephen Hadley, the US national security adviser, said: "Expectations ... have been generated and it is important that those expectations [are met]."
Gordon Brown on Thursday became the first world leader to sign up for the summit, to be held on June 22 in the Saudi Arabian port city of Jeddah.
The prime minister has been a sharp critic of the Opec oil cartel, of which Saudi Arabia is the most powerful member. He has called the operation of the group "scandalous".
Such criticism - especially from Group of Eight (G-8) energy ministers last weekend - was the impetus for King Abdullah, Saudi Arabia's leader, to call the meeting, diplomats said.
Ibrahim al-Muhanna, a spokesman for Saudi Arabia's energy ministry, said: "We have realised that oil prices really have increased to unjustifiable and unreasonable levels."
He said this could have a "negative impact on the global economy, especially the economies of the developing countries and it might even have a negative impact on the oil industry in the long term".
But the decision to call a meeting was fraught with risk, said western diplomats. "If nothing concrete and convincing [in terms of new investment or new supplies] comes out of the meeting, it could hit back both Saudi Arabia and the oil market [pushing prices higher]," said one envoy.
To fulfil those expectations Saudi Arabia could announce increased production from its Khursaniyah oilfield, whose development was close to complete, diplomats and oil industry officials said.
This could raise production by as much as 500,000 barrels of oil a day from the current level of 9.45m b/d. However, such a move would undermine Riyadh's argument that high oil prices are fuelled by speculators and the weakness in the dollar, not by a lack of supply.
It is also far from clear whether oil prices would fall significantly on the news because the field's development is well known.
When Saudi Arabia recently offered an extra 300,000 barrels a day, the market shrugged off the news and continued to rise, reaching almost $140 last week.
Shokri Ghanem, chairman of Libya's national oil company, warned there was little Opec could do at the meeting, for which he said he had yet to receive an invitation. "Prices have nowhere to go but higher. The age of two-digit oil prices is over, it will always be three digits," he said in an interview.
"Opec can do nothing. Opec is reaching its peak production and there is no more that countries can produce. They are squeezing their rocks as hard as they can," he added.