(MENAFN - The Peninsula) Saudi Arabia is likely to maintain high oil production in the event consumer countries release emergency stocks, but it will not seek to lure buyers for more oil by discounting its crude, industry sources said.
US Secretary of State Hillary Clinton on Saturday in Riyadh sought an assurance from The Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz of Saudi Arabia that the kingdom would not neutralise a release of inventories by consuming countries by cutting its production.
Saudi officials told the US delegation that a drawdown was "unnecessary" but said the kingdom would continue to meet global oil market demand if the United States and allies went ahead, an industry source familiar with the matter said.
"Saudi production will unlikely change from the levels we see now, even if the stocks are released because the stocks will not have an impact," another source familiar with the talks said. "Everyone knows that Aramco is a commercial operation and it will not discount oil," he added, in reference to oil sales by the Saudi state oil company.
The United States with Britain and France is considering a release from strategic reserves and is seeking cooperation from other consumer countries.
Saudi Arabia has repeatedly said it is meeting customer needs and that it is ready to meet any extra requirements. A European Union embargo and US financial sanctions on Iran are expected to deepen a decline in Iran's oil sales over the next few months. Saudi is the only producer with spare capacity.
"Aramco meets the needs of its customers whether an embargo is in place or whether a strategic stock is used," Saudi Deputy Oil Minister Abdul Aziz bin Salman bin Abdulaziz told reporters in Dhahran yesterday.
Riyadh has long avoided pushing down oil prices by offering deeper discounts for its crudes in an effort to encourage refiners to store more crude. Last June, the International Energy Agency (IEA) group of major consuming countries released stocks when prices rose during civil war in Libya.
Saudi Arabia kept its output more or less steady after the announcement but then cut supplies as oil from consumer stocks reached the market. Saudi pumped 9.85m b/d-9.90m b/d from July to September, before falling to just over 9.40m b/d in October and November. It has since risen steadily back to about 9.90m b/d.
Saudi Oil Minister Ali bin Ibrahim Al Nuaimi last month said the kingdom had met all its customers' requests for oil and stood ready to raise output to full capacity of 12.5m b/d, if needed.
Meanwhile, oil prices fell yesterday in tug-of-war trading as caution about slower demand growth curbed prices even as North Sea cargo delays and the prospect of tightening sanctions on Iran's exports limited losses.
Light trading volume for both Brent and US crude contributed to the choppy trading trajectory ahead of the long Easter holiday weekend, even as prices remained stubbornly range-bound.
After surging more than 2 percent the previous session, Brent had losses limited by support from delays to North Sea loadings caused by Total's leaking oil and gas platform and one of BP Plc's shut for unplanned work, along with the ongoing uncertainty over Iran.
Brent crude slipped 40 cents to 125.40 a barrel by 12:21 pm EDT (1621 GMT), having slumped to 124.42, just above the 30-day moving average of 124.36. The intraday peak was 125.97. US crude fell 73 cents to 104.50 a barrel, having traded from 104.13 to 105.18.