Saudis To Pump More Oil

Traders again shrugged off a pledge by Saudi Arabia to increase its oil production if needed and oil prices rose Monday, with the focus on disruptions to Nigerian supply and heightened Middle East tensions.

Saudi Arabia said Sunday it would produce more crude oil this year if the market needs it. The kingdom announced a 300,000 barrel per day production increase in May and said before the start of the meeting in Jeddah that it would add another 200,000 barrels per day in July, raising total daily output to 9.7 million barrels.

The announcement had already been factored into oil prices, analysts said.

Light, sweet crude for August delivery traded up $1.26 at $136.62 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe. On Friday, the contract rose $2.76 to settle at $135.36 a barrel.

Ray Carbone, a senior oil trader with Paramount Options, Inc., told CBS' The Early Show on Monday that the Saudi's promise was simply "too little, too late."

Carbone added that "we may test the high spending" this week, predicting the price of a barrel of crude could reach the 140 dollar mark.

Saudi Arabia's pledge fell far short of U.S. hopes for a specific increase. The United States and other nations argue that oil production has not kept up with increasing demand, especially from China, India and the Middle East. But Saudi Arabia and other OPEC countries say there is no shortage of oil and instead blame financial speculation and the falling U.S. dollar.

Analysts said the meeting helped provide some clarity as to the size of spare OPEC capacity available. Saudi Arabia said it is willing to invest to boost its spare oil production capacity above the current 12.5 million barrels per day planned for the end of 2009 - if the market requires it.

Total worldwide crude production is about 85 million barrels per day, but analysts say supplies remain tight amid disruptions to production from Nigeria, Africa's largest producer.

With expectations fading that the Saudi moves would drive the market downward, analysts suggested present high levels were here to stay, at least for the short term.
Royal Dutch Shell PLC said Friday that it cannot meet contractual obligations to export oil from a Nigerian oil field following a militant attack Thursday.

However, the head of Nigeria's white-collar oil-workers union denied reports of a strike targeting Chevron Corp.'s Nigerian operations. While negotiations with the company over staffing levels were deadlocked, there was no workers' action on Monday, said Bayo Olowoshile, the head of the union known as Pengassan.

Strikes by white-collar workers infrequently immediately impact companies' oil production, which is largely automated in Nigeria.

Nigerian oil workers also reportedly decided to strike at a Chevron Corp. facility beginning Monday.

But oil prices might find some relief from Sunday's announcement by Nigeria's main militant group that it would halt attacks starting at midnight Tuesday. The Movement for the Emancipation of the Niger Delta declared a unilateral cease-fire, saying elders in the restive southern region had asked the fighters to allow peace efforts to go ahead.

The group's attacks have sliced about one quarter from Nigeria's normal oil daily oil output, helping buoy crude prices in international markets.

Also supporting oil prices were worries about heightened tensions between Israel and Iran, after Pentagon officials said Friday a large-scale Israeli military exercise in the eastern Mediterranean early this month could have been a demonstration of Jerusalem's ability to attack Iranian nuclear facilities.

In other Nymex trading, heating oil futures added nearly 5 cents to $3.8203 a gallon while gasoline prices by almost 3 pennies to $3.4580 a gallon. Natural gas futures rose 21 cents to $13.204 per 1,000 cubic feet.

Brent crude oil futures rose $1.29 to $136.15 a barrel on the ICE Futures exchange in London.