Naimi clarified that "What is required over the long-term is not more oil in the ground, but rather the assets to bring it to the surface, to process it, and to supply it to markets around the world. The Kingdom for its part is providing those assets through its vast integrated investment program all along the value chain". He added that "Our industry is experiencing stretched refining capacity worldwide, and a number of infrastructure bottlenecks around the globe are creating difficulties. Just as importantly, a shortage of complex conversion capacity to process heavy sour crudes, coupled with increasingly stringent and varied refined product specification, are also causing pain for consumers at the pump". He pointed out that "Our industry has navigated such rough waters in the past without witnessing the kind of price rises and market volatility that have brought us together today. Looking at the data that are in front of us today, studying the best forecasts we have of future supply and demand trends, and considering my previous discussions with many of you, I have reached a number of conclusions about the current market situations - a set of beliefs based on facts, if you will. First, as I noted earlier I believe that there has been a parting of the ways when it comes to oil supply-demand balances and other industry fundamentals on the one hand, and the price behavior and market volatility on the other. Industry fundamentals cannot account for today's high prices, nor for the enormous degree of market volatility that we have experienced of late. Instead, I believe price rises and volatility are being fueled by a wide range of other factors which lie beyond the ability of the petroleum industry to address or even influence. Perhaps foremost among these are recent trends in the global financial markets, including weak equity and bond markets that have encouraged investors to move their capital into commodities like oil. I would also note that while there is little or no correlation over the past two years between global crude oil inventories and crude oil prices, there has been a strong correlation between the increasing volumes of crude oil futures trade on the NYMEX and rising prices. According to many observers and analysts, inadequate oversight, regulation and reporting of speculative investments in commodities have further exacerbated this situation". Al-Naimi asserted that Saudi Arabia has a historical commitment to market stability and for that reason, as a matter of policy, he said, we have maintained spare production capacity at high cost to the Kingdom. As you know, we have readily employed this spare capacity in the past whenever the market has justified its use. In today's environment, I am convinced that supply and demand balances and crude oil production levels are not the primary drivers of the current market situation and that markets are already well supplied. But despite this assessment, I also strongly believe that each of us must do what we can to alleviate these difficult conditions. Therefore, given our current spare capacity, today I would like to state that for the remainder of this year Saudi Arabia is prepared and willing to produce additional barrels of crude oil above and beyond the 9.7 million barrels per day which we plan to produce during the month of July, if demand for such quantities materializes and our customers tell us they are needed". -- More
