Saudi Arabia May Announce Oil Output Increase June 22

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By Ayesha Daya June 15 (Bloomberg) -- Saudi Arabia may announce an oil output increase at a meeting it will host in Jeddah on June 22 for oil producers and consumers because customers are asking for more crude, an OPEC official said today. There is more demand for Saudi oil from ``all over'' the world, the Organization of Petroleum Exporting Countries' official said in a phone interview. He spoke on condition he not to be identified because no final decision has been taken. He declined to comment on the size of the possible increase and denied reports that the Saudi Oil Minister Ali Al-Naimi would make a statement today on oil production. The kingdom will host the Jeddah summit after oil prices more than doubled in a year to a record $139.12 a barrel on June 6. Crude oil fell on June 13 to settle at $134.86 a barrel on the New York Mercantile Exchange as al-Naimi said prices were ``unjustified.'' Surging oil and food prices have replaced the credit squeeze as the biggest threat to the world economy, finance ministers from the Group of Eight nations said after meeting in Osaka, Japan yesterday. Higher commodity prices pose a ``serious challenge'' to global growth, they said in a statement. State-owned Saudi Aramco said June 13 that it would start pumping oil from its 500,000 barrel-a-day Khursaniyah field within a month, a project it previously had said would start operating last December. After confirming the delay in opening the field in January, Aramco said it was ready to use its spare capacity, which included 1 million barrels of Arab Light crude, to meet market demand. `Abnormally High' ``An increase of some 500,000 barrels a day would flood the market and bring prices down,'' Raja Kiwan, an analyst with PFC Energy, said by phone from Manama, Bahrain today. ``Most would go into stocks, and dispel rumors that the Saudis don't have spare capacity that they can bring on stream quickly.'' Saudi's King Abdullah will do ``what he can'' to bring oil prices down to ``adequate levels,'' the United Nations Secretary- General Ban Ki-Moon said after meeting the monarch late yesterday, Agence France-Presse reported today. The king told Ban that oil prices are ``abnormally high,'' AFP reported. Saudi Arabia pumped 9.134 million barrels of crude a day last month, according to a monthly report from OPEC June 13, which cited secondary sources including analysts and news agencies. The country's crude output was 9.25 million barrels a day in May, according to Bloomberg estimates. `Calm Market Sentiment' The kingdom last month said it would ship an additional 300,000 barrels a day of crude from June to satisfy customer demand. ``Saudi output of 10 million barrels a day would be sufficient to calm market sentiment in the short-term, but OPEC members will ask what it means for the second half of the year, when things may cool off price-wise,'' Kiwan said. The world has enough oil, OPEC said in its monthly report published June 13, blaming the price surge on market speculators and rejecting argument of oil consumers including the U.S. that there's a shortage of supply. OPEC President Chakib Khelil last week ruled out the possibility that the group will raise output to curb prices, saying that supply is ``more than enough''. Iran, Venezuela and Libya ministers concurred that there is no need for an output increase.