Saudi Arabia’s oil minister said the Organization of Petroleum Exporting Countries should increase quotas by 6.4 percent, causing the biggest drop in crude oil prices in more than a month.
The group, producer of more than a third of the world’s oil, should boost its output target by 1.5 million barrels per day, from 23.5 million now, Saudi oil minister Ali al-Naimi said in a faxed statement.
“It is certain that the kingdom believes that increasing the OPEC production ceiling would keep supply and demand in balance,” al-Naimi said in the statement. “We in the kingdom estimate the required increase of the ceiling should not be less than one and a half million barrels per day.”
Oil prices last week reached to $40 a barrel in New York for the first time since the 1990-1991 Persian Gulf war on concern of potential gasoline shortages in the U.S. during the summer travel season. New York crude lost as much as $1.31 a barrel, or 3.3 percent, to $38.62 a barrel in electronic trading. Brent crude slid as much as $1.40 to $35.60 and was down $1.12 a barrel as of 11:08 a.m. in London.
The quota increase will be discussed among OPEC oil ministers during the International Energy Forum to be held in Amsterdam next week. OPEC ministers should issue a decision to increase quota during their meeting on June 3 in Beirut, the Saudi minister said.
Al-Naimi said demand for oil is expected to increase in the second half of this year because of greater consumption from Asian countries.
“We do not want to see oil prices at the level that they negatively affect the growth of the international economy or the demand for oil,” al-Naimi said.
Saudi Arabia, the world’s biggest oil exporter, and nine other OPEC members lowered output quotas by 1 million barrels a day as of April 1 to 23.5 million a day to offset an expected drop in demand.
Al-Naimi blamed oil price increases on “the market’s unwarranted fear of disruptions in supplies from some oil- producing countries, when only the kingdom and probably two other countries have spare production capacity.”
Expected shortages of some types of gasoline in the U.S. and speculation in the future crude markets have also driven oil prices to high levels, he said.
“The kingdom’s policy is based on clear fundamental principles — maintaining enough supplies to avoid prices and fluctuation which might negatively affect producers, consumers and the oil industry as well,” the minister said.