n KSA steps in early with extra output SPECULATORS out in the oil market may have been hoping for a windfall from turmoil in the Middle East but they were disappointed by the action taken a few days ago by Saudi Arabia to make up the shortfall created by the 50 percent cut in production by Libya, the OPEC member, which is embroiled in protests calling for democratic reform. In fact, the oil price dropped slightly after Saudi Arabia raised its production to nine million barrels per day, an increase of 700,000 barrels a day. The measure has helped to curb a rise in prices. West Texas Intermediate (WTI), the US benchmark grade, is steady at just under $100 a barrel; while in London, the North Sea Brent, the European benchmark, was at around the $112 level. This is good news all round, particularly for already hard-pressed consumers. Any increase in the cost of fuel, or shortage of fuel in the market, always results in increased food and commodity prices. Saudi Arabia may be the world's largest oil producer, and its gas is cheap inside the Kingdom, but it cannot escape from high prices because it imports many goods and services. And when prices rise it is not only the most vulnerable of society that takes a beating – the poor and unemployed – but also middle class families. Not that speculators have been passively waiting for oil prices to rise because of the uprisings in the Middle East, they have been doing their bit to talk up the price. Just last week Nomura Securities raised the possibility that oil prices will rise to the unprecedented high of $200 a barrel, based on cuts in production in Libya and Algeria – of 1.7 million and 1.4 million barrels a day respectively. They have also been betting on similar turmoil in Saudi Arabia, which most analysts agree is highly unlikely. Saudi Arabia is stable and is the only country at the moment that has spare capacity of four million barrels a day. It is the acknowledged guarantor in the world market today for any fall in output. In any case, Brazil and Russia are also out in the market to come to the rescue in dire circumstances. No emergency meeting is being planned by OPEC before its scheduled June meeting and the US Department of Energy estimated late last month that current crude stockpiles are at 346.7 million barrels a day, 9.2 million more than a year earlier. It all makes for good news and stable prices for consumers everywhere. __
