Saudi Arabia is taking steps to cool the overheating global energy market, boosting its exports to the US and re-opening old oilfields to expand production, as the world's largest oil producer tries to prevent damage to the global economic recovery.
The Saudi cabinet on Monday said the kingdom would work "individually" and with others for the "return [of] oil prices to fair levels". Riyadh recently said it aimed to keep oil prices at $100.
"High oil prices . . . can lead to negative effects on the global economy," the cabinet agreed, according to a summary carried by the official Saudi news agency.
Oil prices were little changed on Monday at $125.65 a barrel, down 16 cents.
The moves by Riyadh come as rising energy prices have become a hot political issue in the US presidential race. Republican candidates have accused President Barack Obama of not doing enough to bring prices down.
'Oil is the new Greece'
The kingdom has not yet publicly disclosed its moves, but Gulf and western officials and traders said the kingdom was boosting its oil exports to the US, after hiring more super-tankers last week. They said it was also reviving production at oil fields mothballed decades ago.
"The Saudis are very concerned about the oil market and are trying to find strategies to bring prices down," said an European-based senior oil trader.
Oil prices have rallied this month to a post-2008 peak of $128 a barrel on the back of supply disruptions in countries ranging from Colombia to South Sudan and the impact of the forthcoming US and European sanctions on Iranian oil exports.
The efforts by Riyadh will become clearer on Tuesday during a meeting of oil ministers of the Gulf Co-operation Council in Doha, the capital of Qatar, where Ali Naimi, Saudi oil minister, plans to expand on the measures the kingdom is taking.
Ed Morse, head of commodities research at Citigroup and a former US oil official, said that if Saudi Arabia sustained its current high production, the kingdom would force crude oil inventories to increase and, "eventually, bring oil prices down".
Saudi Arabia is walking a tight line as it wants to reduce prices while, at the same time, avoiding an open confrontation with Iran. Tehran has warned Saudi Arabia several times over the last two months not to increase its oil production to offset the impact of the US and European sanctions on Tehran's crude exports.
Saudi's spare capacity has fallen to the lowest level since 2008 after the kingdom boosted its production to 10m barrels a day, a 30-year high.
Saudi Aramco plans to revive the Dammam, the kingdom's first facility that produced oil in 1938 and was mothballed in 1980. The state-owned company has already fast-tracked the development of the giant Manifa oil field.
The measures by Riyadh come as other countries in Opec, the oil producers' cartel, also boost their exports. Iraq is bringing about 300,000 b/d of fresh sales on top of current export of about 2.1m b/d with the opening of a new oil terminal in the Gulf. Saudi Arabia also believes that fellow Gulf countries Kuwait and the United Arab Emirates would be able to boost their exports by several hundred thousand barrels in an emergency.
Source Financial Times