Exclusive: US and Saudi Arabia agree to bring oil prices down to $85-90
debkafile‘s Gulf sources disclose that US Vice President Dick Cheney persuaded Saudi leaders to raise production in order to curb rocketing world oil prices, during their talks in Riyadh on Saturday, March 22.
King Abdullah thereupon convened the Supreme Council for Petroleum and Mineral Affairs Sunday, to underline the kingdom’s commitment to stabilizing the international oil market “by ensuring adequate supply.”
The Saudi Supreme Oil Council’s statement emphasized OPEC’s role in “stabilizing the world energy market and realizing global progress and prosperity.”
It also “emphasized the Kingdom’s desire for oil market stability, and ensuring supplies to different regions at all times to maintain world economic growth.”
The council expressed its satisfaction with the progress in new investment projects for expanding oil production and refine capacity; and, finally, committed the kingdom to working with OPEC countries, other producers and consuming countries toward oil market stability and avoidance of the effect of harmful speculation.”
These decisions, as debkafile‘s Gulf oil sources disclose, add up to the Saudi King’s compliance with Cheney’s request to act for stable world oil prices – by speeding up the expansion of production and refining projects both inside OPEC and in cooperation with other world producers, such as Russia and Norway.
Cheney thus succeeded where President George W. Bush failed in January.
The Saudi monarch refrained from complying with the US president’s request to persuade members of OPEC, the Oil Producing Cartel, at its last meeting to step up production. The Saudis only spiked the initiative of radical members, led by Iran and Venezuela, to cut production down.
Saudi Arabia has targeted the year 2009 for increasing its output from 11 to 12.5 million barrels per year. The new Council decision brings the target date forward by some months. In any case, the kingdom does not export all it produces and could sell more by drawing on its emergency reserve.
In the first two days of the week, oil prices, like other commodities, began to slide – mainly in response to US Federal Reserve steps. Those steps may have helped convince Riyadh that it was time for a more aggressive policy to curb the speculation rife in oil prices.
While the extent of this downward trend is hard to predict, oil producers are looking favorably at prices of $85-90 in the short term, which are realistic given the protracted US dollar slump. Vice President Cheney proposed lower price levels for the more distant future, but Abdullah said that given the volatility of international oil and financial markets, this was not realistic.