By John Richardson
SAUDI Arabia has offered its main customers in the US, Europe and Asia extra oil supplies until the end of the year as a result of concerns over the impact that expensive crude could have on the global economy.
This follows last month's call from the Group of Seven finance ministers for oil exporters to raise production.
Saudi Arabia initially appeared to have said no to the Group of Seven, but now appears to have changed its mind, no doubt in response to the alarming increase in oil prices. By last Friday, Brent had risen by 33 percent compared with mid-June.
The bad news for the Asian petrochemicals industry is that if Saudi Arabia pumps more oil, this means more associated gas and therefore even higher operating rates at the country's cracker complexes.
Saudi Arabia's previous attempt to bring the oil price down, which involved raising crude production to 9.9m barrels a day, contributed to a sharp rise in polyethylene (PE) and mono-ethylene glycol (MEG) shipments to China.
New polymer capacities in the Kingdom could exert further pressure on the Asian naphtha-based industry as it struggles with the weak China market.
Back in May 2011, we were being told that these new capacities would be easily absorbed. How the world has changed.
Good news would, of course, be success by Saudi Arabia in reducing oil prices.
But given all the hot money flowing into commodities as a result of QE3, how confident can we be that Saudi Arabia will succeed?