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Last Updated: Wednesday, 11 August, 2004, 21:15 GMT 22:15 UK
Saudi Arabia to open up oil taps
Worker turns on valve at oilfield
The world's biggest exporter says it can immediately lift output
Saudi Arabia is ready to pump as many as 1.3 million extra barrels a day (b/d) of oil to cool runaway prices, the country's oil minister has said.

Ali Naimi said the country had pumped 9.3 million b/d over the past three months, but output would be raised to meet any extra demand.

US-traded oil hit 21-year highs of more than $45 a barrel on Tuesday, amid concerns about supply disruption.

Oil prices fell briefly on the news, but still finished the day higher.

US light crude closed up 28 cents at $44.80 a barrel in New York trade, while in London Brent crude rose 29 cents to settle at $41.57 a barrel.

Renewed bombing threats by an anti-US militia in Iraq and an unexpectedly sharp fall in weekly US crude inventory figures helped push prices higher.

Pumped up

Saudi Arabia has the world's largest proven oil reserves and is the only country with significant spare output capacity.

"The Kingdom is well prepared to meet all the requirements of the international oil companies if they need additional volumes," Mr Naimi said in a statement.

He added that Saudi Arabia wants "to avoid any shortage of oil supplies in the world oil market, provide enough oil supply as needed and prevent any soaring prices that may impact the growth of global economies, especially in developing countries".

The world's thirst for crude has been boosted by accelerating growth in China and India, and a general recovery in the global economy and the US.

According to the International Energy Agency, the high oil price could dampen that growth, especially in Europe and developing world.

The IEA estimates that an average price of $35 a barrel for this year would take half a percentage point off global growth.

Earlier on Wednesday, the organisation lifted its estimate for world oil demand, saying that it was running at 82.2 million barrels a day - 750,000 more than previously thought.

The upwards revision means that demand has grown by a 2.5 million barrels a day this year.

Interruptions

What has worried the market - and pushed prices higher - is that there is very little room for manoeuvre.

With producers already pumping flat out, there is hardly any slack left in the system should a problem arise.

And there are a number of potential flash points.

In Russia, the biggest producer of oil outside of the Opec oil cartel, a spat between the government and oil and gas company Yukos has raised question marks over output.

In Iraq, which is second only to Saudi Arabia in terms of proven reserves, continued fighting between US and coalition troops and militants has disrupted output.

The upcoming presidential referendum in Venezuela is also seen as a potential source of disruption for global supplies.

The country is the world's fifth-largest producer, and political instability and anti-government strikes there prompted a jump in oil prices in 2002.


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