LONDON: The world’s top oil exporter, Saudi Arabia, will stand by its policy of pumping enough oil to satisfy markets and stabilise prices following the death of King Fahd, a leading Saudi diplomat said yesterday.
The kingdom’s next ambassador to the United States and outgoing ambassador to Britain, Prince Turki Al Faisal, told reporters: “I cannot imagine there will be any particular change (in oil and foreign policy).” “The Crown Prince...worked closely with the late king on implementing the policies of Saudi Arabia both external and internal,” he added.
Top officials from oil cartel Opec also expressed confidence that newly-appointed King Abdullah would stay the course he has charted over the past decade.
“I believe that there is confidence that his (Fahd’s) brothers, the leaders of Saudi Arabia, will adopt the same approach and the reaction of the markets to this sad news will calm down,” Opec president and Kuwaiti Oil Minister Shaikh Ahmad Al Fahd Al Sabah said.
Oil prices moved moderately higher after Fahd’s death was announced.
“The shock in the market because of the death of King Fahd will be temporary,” said Iranian Oil Minister Bijan Zanganeh.
“Because Saudi Arabia’s policy was conducted by Crown Prince Abdullah, naturally there should be no change in the country’s policy.”
Saudi Arabia, lead producer of the Organisation of the Petroleum Exporting Countries, would prefer to see US oil prices below the $50 a barrel level that some economists regard as too high for a healthy world economy.
To keep world markets sufficiently supplied, Riyadh is now pumping about 9.5 million barrels per day (bpd) of crude and has vowed to keep spare production capacity of 1.5 million to 2 million bpd to meet any supply shortfalls.
“Saudi Arabia will continue to give its customers what they want (under newly appointed King Abdullah),” agreed a Saudi oil industry source.
But the kingdom’s high production rate has failed to brake oil’s relentless rally, which has taken US crude above $61 a barrel as refinery outages in the United States spark fears of product shortages.
Saudi Arabia, which straddles a quarter of all crude reserves, has an ambitious $50 billion plan in place to boost official production capacity to 15 million bpd from 11 million bpd now.
State oil giant Saudi Aramco will continue to have sole control over the country’s prized oilfields — off-limits to foreign investors since nationalisation in the 1970s.
n NEW YORK: Crude oil futures shot above $61 yesterday, buoyed by nervousness sparked by Saudi Kind Fahd’s death and Iranian threats to restart nuclear enrichment. News of continued expansion of the US manufacturing sector added to the bullishness.
The twin events, while not seen as immediately consequential to the market, added to worries about supplies from Opec’s top two producers.
“I’m not sure if there is any significance to the oil market, but the underlying bullishness remains in force today,” Dow Jones Newswires quoted a broker as saying.
The front-month September crude futures contract on the New York Mercantile Exchange rose as high as $61.80 a barrel, up $1.23, at midday.
Petroleum products futures were higher, partly on the spike in crude future and partly on concern about continued US refinery snags.
September Brent on London’s International Petroleum Exchange climbed to $60.47 a barrel, up $1.11.
Prices rallied overnight on news of Fahd’s death, although analysts dismissed worries about Saudi oil supplies in the post-Fahd era.
Mike Lynch, president of Strategic Energy and Economic Research, said the market’s bullish reaction is likely to prove short lived.
“The market is going to view it as one of those little news events that scare people and make them buy oil, but the policy won’t change,” he said. “The leadership isn’t changing; Abdullah has been in charge for 10 years.”
Iran’s threat to resume nuclear enrichment is another one of those news events.
Iran on Sunday threatened to restart uranium reprocessing work if European negotiators don’t immediately offer a promised package of incentives to entice Tehran to freeze its nuclear programme.
Traders are concerned rising tensions between Tehran and Washington could lead to a disruption of Iranian oil production of some 4 million barrels a day. Iran is Opec’s second largest oil producer.
Lynch said: “We still got a long, winding way of negotiations before sanctions are put in place. That’s what people are watching.”
Adding to the bullishness in the market was news that the US factory sector strengthened in July, growing for the 26th straight month, according to the Institute for Supply Management.
n RIYADH: Saudi Arabia is riding an economic boom on a par with its petrodollar bonanza a quarter of a century ago.
Record oil prices, rising production and a raft of planned power, water and petrochemical projects have combined with Saudi Arabia’s modest economic liberalisation to provide a platform for strong growth after years of stagnation.
Financial analysts predicted that King Fahd’s death yersterday would have no major impact on the Saudi economy.
“This year will be the best in the kingdom’s economic history,” leading Saudi bank Samba Financial Group said. It forecast the kingdom would reap a record budget surplus of 191 billion riyals ($51 billion) and realise economic growth of 6.5 percent in real terms in 2005.
Although Saudi Arabia’s economy remains hugely dependent on oil revenues, economists say it has evolved since the oil boom of the 1970s when economic growth was almost entirely driven by government spending of the oil income.
The kingdom now enjoys low inflation — officially estimated below one percent — booming stock and real estate markets and a non-oil private sector beginning to make a significant contribution to high economic growth.
State oil firm Aramco plans multi-billion dollar investments to further increase the Gulf country’s oil production capacity from 11 million barrels per day to 12.5 million.
After two decades of near-continuous deficits the government has reported two consecutive years of healthy surplus. The extra cash has been spent cutting Saudi Arabia’s domestic debt to two- thirds of GDP, building up foreign assets and rewarding security forces tackling a two-year Al Qaeda insurgency.
Diplomats say one of the new king’s challenges will be to ensure that the government’s return to affluence does not prematurely end the economic reforms and fledgling political changes under way in the absolute monarchy.
Despite the healthy financial outlook, the kingdom still faces huge challenges finding work for the flood of Saudis entering the job market every year.
Six million expatriates from other Arab states, Asia, Europe and the United States work in Saudi Arabia, whose native population is less than 17 million. The foreigners do basic manual work to banking and oilfield engineering.
Years of government drives to Saudi-ise the workforce have run into the sand, thwarted by the disparity between wages paid to Asian labourers and those acceptable to young Saudis, and by an education system which does little to train Saudis for work.
The immediate picture is far healthier than a decade ago, when Saudi Arabia was paying heavy costs for the 1991 Gulf War, estimated at $50 billion, and oil fell below $15 a barrel.           – Agencies 



DUBAI: Saudi stocks rebounded from early declines after the head of state King Fahd died yesterday, on the view that power in the kingdom would pass smoothly to his reform-minded brother, Crown Prince Abdullah.
The main Riyadh market index, which slid 5.6 per cent before being suspended briefly, narrowed its decline when trading resumed and was down 1.06 per cent at 13048.56 points by 0900 GMT. Petrochemical giant Saudi Basic Industries, the largest listed Saudi Company by market capitalisation, fell 1.1 percent to 1322 riyals.
“You had the succession clarified within half an hour. Crown Prince Abdullah has shown himself to be one of the most forward looking, pro-reform leaders in the region,” said Haissam Arabi, head of asset management at Shuaa Capital, an investment bank in Gulf Arab neighbour the United Arab Emirates.
The Dubai stock market index in the UAE was down 1.9 per cent and the key Kuwait index was almost unchanged. “There was a bit of compulsive selling in Saudi, which is natural in any emerging market where you have a monarch running the country,” said a trader in Dubai. “We saw a sharp fall, but I think the market will bounce back.”
Stock markets across the Gulf Arab region have soared in the past two years as record high oil prices underpinned company profits and wealthy citizens poured money into equities.                      – Reuters 
Last update on: 2-8-2005