Crude falls over $1 on increased Saudi supplies

16 June 2008 09:13  [Source: ICIS news]

SINGAPORE (ICIS news)--Crude prices fell by more than $1/bbl on Monday, on news that Saudi Arabia plans to raise production to its highest level since the Iran-Iraq war in a bid to curb record high prices in the oil markets.

At 7:46 GMT on Monday, July NYMEX light sweet crude futures traded at $134.03/bbl, down 83 cents/bbl on Friday’s settlement level. Earlier the contract fell to a low of $133.46/bbl, down $1.40/bbl.

At the same time, August ICE Brent futures were traded at $134.46/bbl, down 65 cents/bbl on the previous settlement price. Earlier the contract fell to a low of $134.02/bbl, down $1.09/bbl.

Over the weekend, the UN Secretary General Ban Ki-moon said that following a meeting with the Saudi Arabian oil minister, Ali Al-Naimi, the world’s largest exporter had agreed to increase production in July to 9.7m bbls/day, the highest output rate since August 1981.

The news follows an announcement in mid-May by the Saudi oil minister that the Kingdom would boost output by 300,000 bbl/day to around 9.45m bbl/day by June to meet higher demand. Reportedly, that increase in incremental output will come from the Ghawar and Safaniyah fields, producing Arab Light and Arab Heavy crude respectively.

In its latest report, the International Energy Agency (IEA) estimated Saudi Arabian oil production in May totalled 9.2m bbl/day.

The longer term impact of Saudi output increases were reported to be hard to judge as much of the production will be in heavier fuel oil rich grades rather than the lighter distillate rich grades that refiners and the market prefer.

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By: James Dennis
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