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Crude hits $146/bbl; Saudi promises more supply

Published on Thu, Jul 03, 2008 at 08:53 | Source : CNBC-TV18

Updated at Thu, Jul 03, 2008 at 22:54

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Crude prices hit a fresh record above USD 144 per barrel as a drop in US crude inventories stoked supply concerns. Crude is now trading at USD 146 per barrel.

Ibrahim Al Muhanna , Advisor to Minister of Petroleum, Saudi Arabia says, "We think there are many factors that affect the oil price. One of the most important is the speculation. As the funds move in the future market, these funds in the futures market push the price higher and higher. With regard to supply and demand, it's well-balanced, and actually, the supply is more than the demand."

"We never know about the future. There are different predictions about the future. Some the oil companies predict higher demand in the future. But we're talking about this year, and next year, and definitely, supply and demand match each other and there is more supply. Another important point is that oil producers like Saudi are increasing their production capacity. We, in Saudi, have invested USD 129 billion to increase production, upstream and downstream. Production, next year, will go up to 12.5 million bpd (barrels per day)."

Ibrahim Al Muhanna feels that it is important to share cooperation with the consumers and also assure the market - to give the right message since right now; it's speculation driving the price higher. "Fear about supply and fear about global economy make people move to the oil mkt. We in Saudi announced whenever our customers in India and anywhere else need more oil, we will give them more oil. At the same time, we're trying to reduce fear. Therefore the price will go down."

He qualified that a majority of OPEC (Organization of the Petroleum Exporting Countries) producers are unhappy about this high price. "We think this will have a negative effect on global economy, especially on the developing economies. We in OPEC are part of the developing markets. We don't like the negative impact on developing markets. We will do whatever we can to bring back stability into the oil market and hopefully it'll happen soon."