Saudi oil chief pledges to offset shortfalls

March 14, 2012 - 3:36 PM
Mideast Kuwait Iraq

Iraqi Prime Minister Nouri Al Maliki, right, talks with Chairman of the Foreign Affairs Committee of the Kuwaiti Parliament Mohammad Al Saqr, left, during his visit to Kuwait's Parliament on Wednesday, March 14, 2012 as part of a two days official visit to Kuwait. (AP Photo/Nasser Waggi)

KUWAIT CITY (AP) — Saudi Arabia's top oil official said Wednesday his country and other oil exporters are ready to offset any shortfalls in supply, as fears of a showdown with Iran over its nuclear program help drive prices higher.

The comments from OPEC's biggest oil producer were followed by a call from a senior American energy official for increased production to relieve what he sees as "tight" markets that are keeping prices high. The official, Deputy Secretary of Energy Daniel Poneman, cautioned that rising crude prices could put the economic recovery at risk.

Saudi Oil Minister Ali Al-Naimi, however, said that the market for now remains "generally balanced," with what he said is ample production and refining capacity.

"Saudi Arabia and others remain poised to make good any shortfalls — perceived or real — in crude oil supply," al-Naimi said at a major oil conference in Kuwait, where he addressed envoys alongside Iranian oil minister Rostam Ghasemi. A transcript of Al-Naimi's remarks was given to reporters.

Al-Naimi made no specific reference to Iran, which is OPEC's second largest oil producer after Saudi Arabia. But the comments come as U.S. and Western partners urge key Iranian oil customers in Asia — such as China and India — to cut back on their imports from the Islamic Republic and turn to other suppliers such as Western ally Saudi Arabia.

There also are fears that military action against Iran could severely disrupt global oil supplies. Iran has threatened to block the Strait of Hormuz at the mouth of the Gulf in retaliation for U.S. and European sanctions targeting its oil exports. The strait is the route for about a fifth of the world's oil exports.

Poneman, Washington's envoy to the Kuwait conference, declined to discuss details of discussions the administration has had with Tehran's big oil customers about reducing their dependence on Iranian oil.

But he warned that the recent rise in global oil prices is worrying.

"We are seeing at the current moment that prices are too high to be consistent with global (economic) recovery, and therefore we are concerned," Poneman said.

Rising gasoline prices in the U.S. — the world's biggest oil consumer — have become a political lightning rod in this year's presidential election campaign. New figures out Wednesday show that gasoline has topped $4 a gallon in four states and Washington, D.C., according to AAA, Wright Express and Oil Price Information Service.

That is putting pressure on the Obama administration to show it is taking steps to try to bring pump prices down, even as it maintains a tough line on sanctions aimed at Iran's oil industry.

Poneman did not rule out the possibility that the U.S. might release oil from the Strategic Petroleum Reserve, as some lawmakers have urged, to bring down prices. "We have every tool at our disposal," he said.

Iran's Ghasemi, for his part, blasted the policies of "unilateral economic constraints" — a reference to sanctions — that he claimed "jeopardizes free trade and continuity of oil supply in the world," according to a text of his speech.

"Ultimately, all the concerned groups in the oil market ... will face various problems," he said.

Ghasemi added that "energy security may not be achieved through interference in the domestic affairs of countries."

The West and others fear Iran's nuclear program could eventually produce atomic weapons. Iran says it only seeks reactors for energy and medical research.

Benchmark oil prices in the U.S. hovered below $107 a barrel Wednesday after a report showed a jump in U.S. crude supplies. Brent crude, which is used to price oil in many other parts of the world, is significantly higher at around $126 a barrel.

The oil ministers spoke at the Kuwait-hosted meeting of the International Energy Forum, which brings together OPEC members and other oil-producing countries as well as large energy-consuming nations and oil companies. Neither al-Naimi nor Ghasemi took questions after their speeches.

In a statement issued at the end of the meeting, the IEF said it remains concerned about "excessive oil price volatility ... as it increases uncertainty and undermines global economic growth."

The Riyadh, Saudi Arabia-based group called for greater transparency and information sharing in world oil markets.