Oil Is Little Changed on Saudi Production

Crude oil was little changed after falling in New York as Saudi Arabia pledged to increase production and militants in Nigeria called a cease-fire in their attacks on oil pipelines and vessels.

Saudi Arabia, the world's biggest oil exporter, will pump an extra 200,000 barrels a day and may increase output again if needed, Oil Minister Ali al-Naimi said in Jeddah yesterday. Attacks on foreign oil companies will end midnight local time on June 24, the Movement for the Emancipation of the Niger Delta, said in an e-mailed statement yesterday.

Crude oil for August delivery traded at $135.72 a barrel at 9:17 a.m. Singapore time after earlier falling as much as 0.8 percent to $134.31 a barrel in electronic trading on the New York Mercantile Exchange. The contract jumped $2.76, or 2.1 percent, to settle at $135.36 a barrel on June 20.

Prices rose late last week after militant attacks cut output from Chevron Corp. and Royal Dutch Shell Plc fields in Nigeria, and a slump in the dollar increased investment in commodities. The New York Times reported June 20 that Israel is increasing pressure on the U.S. and Europe to halt uranium enrichment by Iran, the second-largest producer in the Organization of Petroleum Exporting Countries.

Brent crude oil for August settlement traded at $135.03 a barrel, down 17 cents, at 9:13 a.m. Singapore time on London's ICE Futures Europe exchange. The contract rose $2.86, or 2.2 percent, to settle at $134.86 a barrel on June 20.

Yesterday's proposed output increase by Saudi Arabia, the second since May, was reported June 16 after a meeting between King Abdullah and United Nations Secretary-General Ban Ki-Moon. The kingdom will offer more oil if there is demand and also plans to increase its daily production capacity to 12.5 million barrels by the end of next year, al-Naimi said yesterday.

Oil prices are being driven by speculation, geopolitics and the weak dollar rather than a lack of supply, OPEC President Chakib Khelil said after the meeting of major consumers and producers in Jeddah yesterday. Saudi Arabia's output increase is ``illogical'' and may do nothing to lower prices, he said.

New York oil prices almost doubled the past year. Prices rose on instability in producing regions and as U.S. consumers resisted changing their driving habits and Asian fuel subsidies artificially sustained demand, Cameron Hanover's Beutel said.

TradingEconomics.com, Bloomberg
6/22/2008 7:45:36 PM