The US and Saudi Arabia, the world's largest consumer and exporter of oil respectively, sought to calm markets on Monday as Crown Prince Abdullah and his ministers laid out their kingdom's investment plans to President George W. Bush.
“Both nations pledge to continue their co-operation so that the oil supply from Saudi Arabia will be available and secure,” a joint statement declared, celebrating six decades of relations between the two nations.
Stephen Hadley, the US national security adviser, told reporters at the president's Texas ranch that plans to increase capacity should be “good news” for the markets.
Analysts said the figures presented were not new, and that Saudi Arabia alone could not have a major impact on markets. Nonetheless, crude oil prices fell for the first time in five sessions as the two leaders discussed a broad range of issues, including Saudi Arabia's political reform efforts, the Israeli-Palestinian peace process, and the “war on terror”.
Mr Bush and the crown prince, who last met in 2002 at the ranch, had developed a “very strong personal relationship”, Mr Hadley said, with “a very good spirit in the room”.
The Saudi investment plans, totalling $50bn (£26bn, €39bn), were discussed in detail between Ali Naimi, the oil minister, and US Vice-president Dick Cheney on Sunday.
Crude oil for June delivery fell 82 cents (1.5 per cent) to $54.57 a barrel on the New York Mercantile Exchange, which closed before the two sides met the media.
Adel al-Jubeir, spokesman for the crown prince, said Saudi Arabia was producing just over 9.5m barrels a day. He indicated that Mr Bush had not asked the kingdom to increase output.
Saudi Arabia had excess capacity of 1.3-1.4m b/d, but it believed current supplies were adequate and had not been asked by its customers for more supplies, Mr Jubeir said. There was no shortage of crude oil, but of refining capacity, notably in the US. He agreed that $50 a barrel was “clearly too high” but would not say what was considered reasonable.
Saudi Arabia planned to be able to produce 12.5m b/d within 2½ to three years, and 15m b/d over the long term, he said. Mr Hadley spoke of 12.5m b/d by the end of the decade. Roger Diwan, oil markets expert at PFC Energy, said that he believed the oil element of their discussions was cobbled together at the last minute because of rising prices and public pressure, and that the two sides would have preferred to spend the time on issues they cared more about.
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