Whither OIL????

The Treasury secretary's comments come as three leading OPEC producers vow to increase capacity to meet rising demand.
From Bloomberg News

October 11, 2004

Record oil prices are threatening economic growth, Treasury Secretary John W. Snow said Sunday, as OPEC members Saudi Arabia, Kuwait and the United Arab Emirates vowed to boost their production capacity to meet soaring demand.

Snow said in an interview on CNN that the cost of oil was "creating headwinds for the otherwise very strong economy."

The per-barrel price soared past $53 last week, partly on concern that there may not be enough spare capacity globally to fully cover potential supply disruptions during winter in the Northern Hemisphere.

Another factor was the shutdown for the third time in a month of the Louisiana Offshore Oil Port as refiners struggled to boost supplies depleted by Hurricane Ivan.

In Abu Dhabi, United Arab Emirates, Saudi Oil Minister Ali Ibrahim Naimi said the kingdom was "willing to do what it takes to satisfy demand." Saudi Arabia, the world's biggest oil exporter, will maintain spare capacity of 1.5 million to 2 million barrels a day "for the foresee- able future," he said before the start of an energy conference.

Saudi Arabia's additional production would be about enough to make up for a total halt in exports from Iraq, as occurred last year during the U.S.-led invasion of that country.

The kingdom and other members of the Organization of the Petroleum Exporting Countries pumped an estimated average of 30.5 million barrels a day in September, up 2% from 29.9 million in August, according to Bloomberg data.

At those levels, the cartel is supplying about 37% of daily global demand of about 80 million barrels. Demand from China and India has pushed up global purchases of oil by more than 2 million barrels a day this year.

"The investment in new capacity has been insufficient and too slow, and it will struggle to keep up with the 3% demand growth that we saw this year," said Youssef Ibrahim, managing director of Strategic Energy Investment Group in Dubai, United Arab Emirates.

The UAE, the fourth-largest oil producer in the Middle East, will add 300,000 barrels a day of production next year and 700,000 in 2006, its oil minister said at the conference.

"We are investing about $1 billion for every 100,000 barrels a day of extra capacity," Ubayd Saif Nasiri said. "We are doing all we can to cool prices." The UAE is pumping 2.5 million barrels a day, he said.

As for Kuwait, it will soon invite international oil companies to bid for a $7-billion project to double the country's northern oil field capacity to 1 million barrels a day, Oil Minister Sheik Ahmed Fahd al Ahmed al Sabah said in an interview in Abu Dhabi.

The new capacity from the Persian Gulf won't come on stream in time for this winter in the Northern Hemisphere.

Crude oil prices may rise further on concern that refiners will fail to secure sufficient imports to make up for a drop in Gulf of Mexico output caused by Hurricane Ivan, according to a Bloomberg survey last week.

In Nigeria, the world's No. 7 producer, oil workers may join a general strike set for today to protest rising fuel prices, the Nigeria Labor Congress said. The country, a member of OPEC, pumped 2.42 million barrels of oil a day last month, according to Bloomberg data.


If you want other stories on this topic, search the Archives at latimes.com/archives.

Article licensing and reprint options