Top oil exporter Saudi Arabia sought to soothe fears about high oil prices, saying on Tuesday that world supplies were well in excess of demand and that crude at $125 a barrel was not justified given the anaemic state of the world economy.
Saudi Oil Minister Ali al-Naimi said the kingdom had met all its customers' requests for oil and stood ready to raise output to full capacity of 12.5 million barrels per day (bpd), if needed.
My only mission is to convey to you that there is no supply shortage in the market, Naimi told reporters at a briefing in Doha, Qatar. We are ready and willing to put more oil on the market, but you need a buyer.
Oil is trading above $124, just $23 short of an all-time high, as tighter Western sanctions on Iran threaten to slow the country's exports.
Oil prices today are unjustifiable on a supply and demand basis. We really don't understand why the prices are behaving the way they are, said Naimi.
Supply of oil is now outpacing demand by over a million bpd, said the Saudi oil chief, and customers are not asking for extra crude.
Riyadh is now pumping 9.9 million bpd - the highest output in decades - and is willing to produce at full tilt, should demand warrant, Naimi said. He expected output next month to stay at 9.9 million bpd. That implied exports of 7.5-8 million, he said.
From our point of view, we have had no customer not satisfied. We have satisfied every request for every customer that has come asking, he said.
We ask the customers, 'Do you need more?' and invariably the answer is 'No thank you.'
NO REPLAY OF 2008
The influential Saudi minister said a repeat of 2008, when oil hit a record high of $147 a barrel, must be avoided but that circumstances now were very different.
It's definitely not the same. There's plenty of supply...inventories are being built, he said. Commercial inventories in countries of the Organisation for Economic Cooperation and Development were likely to reach 60 days of forward cover in March from 57 days in January.
Flows from Libya and Iraq, fellow members of the Organization of the Petroleum Exporting Countries (OPEC), were also rising, Naimi said, dismissing outages from non-OPEC producers Sudan, Yemen and Syria as minuscule.
The Saudi minister sought to clear up what he called misunderstandings over Riyadh's spare production capacity, which now stands at 2.5 million bpd.
There's a lack of understanding of what we do operationally, said Naimi. We spent a lot of money building that capacity. We finished building it in 2009, and it is there to be used.
Saudi has also filled up stockpiles inside and outside the kingdom to meet immediate need, he said, with about 10 million barrels being held in Rotterdam, Sidi Kerir and Okinawa.
He gave short shrift to a possible U.S. and British release of emergency stocks to cool oil prices.
What I can tell you is that they have done it before and it didn't do anything, Naimi said. You saw what happened in the last release. Nothing.
He dismissed the possibility that Iran, OPEC's second biggest producer, would make good on its threat to shut down the vital Strait of Hormuz oil shipping route.
If you believe Hormuz will be closed, I will sell you the Empire State (building), he said.
(Writing Peg Mackey; Editing by Jane Baird and Anthony Barker)