Saudi Arabia (OPCRSAUD) should raise oil production by 200,000 to 300,000 barrels a day to prevent prices from damaging the world economy, according to the Centre for Global Energy Studies.
The world’s largest oil exporter needs to restore daily production rates to 10 million barrels a day, from 9.8 million currently, as price levels of more than $120 a barrel are crimping economic growth, according to the London-based Centre. Concern that demand is slowing just as Libya revives output will probably deter Saudi Arabia from making the necessary increase, CGES said.
“We’ve been in the danger zone since prices got to $100,” Leo Drollas, the CGES’s chief economist, said in a telephone interview today. “Economic growth will stutter globally; Europe is doldrums, and the U.S. is recovering but precarious.”
Saudi Arabian production is “still not enough, given the state of the market and prices,” Drollas said. “The market is tight, and stock cover is low.”
The kingdom is unlikely to bolster supplies by the amount required, Drollas predicts.
“They’re worried about putting more oil onto the market at a time when they think demand is not very strong, and likely to decline further with the European debt crisis,” he said.
Still, Brent crude is unlikely to surpass this year’s peak of $128.40 a barrel during the rest of 2012, as prices are already high enough to curtail fuel consumption, according to Drollas.
CGES was founded in 1990 by former Saudi Arabian Oil Minister Sheikh Ahmad Yamani.
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