Saudi Stuns Rest Of OPEC
With Increased Output Plan
By Michael Georgy
LONDON (Reuters) - Stunned OPEC producers were left groping in the dark on Tuesday after a shock Saudi announcement that the kingdom was preparing to boost oil output.
Just 10 days after an OPEC pact to raise output for the second time this year, the world's biggest oil exporter suddenly vowed to unleash more barrels to send oil toward the cartel's $25 target.
Saudi Oil Minister Ali al-Naimi late on Monday announced through the official Saudi Press Agency that the kingdom would spearhead an increase of 500,000 barrels a day if high prices did not ease in the next few days.
An OPEC source said Saudi Arabia -- OPEC's biggest producers and holder of vast spare output capacity -- was prepared to act alone if other producers did not have the oil muscle to deliver fresh supplies.
Saudi Arabia holds most of OPEC's spare capacity. Kuwait and the United Arab Emirates are the only other cartel producers that can currently resort to spare capacity but their capabilities pale in comparison to the kingdom's.
All fellow OPEC states could do when waking up to news of the Saudi statement on Tuesday was wait for the dust to settle.
Iran, OPEC's second largest producer, refused to even acknowledge the official Saudi statement, saying reports of a possible unilateral output hike were ``not true'' and ``news hype.''
An Iranian oil ministry source, quoted by the official Iranian news agency, said that OPEC members who agreed to a production hike in a June 21 meeting had pledged to work together of future output policy.
``When an OPEC production increase has been legally determined, there is no reason to violate agreements and succumb to lawlessness and act unilaterally,'' the ministry source said.
Saudi Arabia had made abundantly clear in recent weeks that it wanted to cut $5 a barrel from prices now at $30.
But its new initiative was kept under wraps, even over the weekend when Saudi Crown Prince Abdullah and Kuwait's Emir Sheikh Jaber al-Ahmad al-Sabah sealed a border deal and later performed a traditional Gulf Arab sword dance to celebrate the agreement between the close regional allies.
``I have no knowledge about this issue,'' said Kuwait's Oil Minister Sheikh Saud Nasser al-Sabah on Tuesday morning.
``We work with the OPEC consensus...This requires consultations with other producing countries,'' added the Kuwaiti minister, who met with Naimi during the weekend festivities in Kuwait.
OPEC's Venezuelan President, Ali Rodriguez, said he had no knowledge of the Saudi plan.
Some In Opec Applaud Saudi Move
Privately however, senior delegates from some member nations applauded the Saudi move.
``The market needed a clear signal that stocks would be replenished,'' said a delegate from an Arab OPEC member nation.
``We think it is a very good thing as high prices were not good for us. But we do hope and expect that when prices fall toward $25 the Saudis will quickly withdraw their 500,000 barrels,'' he added.
The Saudi decision also stirred emotion in Iraq, even though the country has no official OPEC allocation because of U.N. sanctions imposed for its 1990 invasion of Kuwait.
Baghdad condemned the Saudi move, saying no country should violate consensus within OPEC.
Non-OPEC Mexico was the one key producer not surprised by the Saudi move. An ally in managing the market in recent years, officials in Mexico say it was approached about lifting output but has made no decision yet.
It was clear later on Tuesday that Naimi was working the telephones to assure several OPEC ministers Saudi Arabia would continue working within OPEC on oil matters.
``Mr. Naimi assured me in a telephone conversation he had with me today that Saudi Arabia will continue to act within OPEC frameworks and will not move outside them,'' Iranian Oil Minister Bijan Zanganeh told reporters.

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