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Saudi Arabia says it can raise oil production to fill any supply gap

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The world’s top oil exporter, Saudi Arabia, said on Monday it could increase oil production by about 2 million barrels per day (bpd) “almost immediately,” a day after Iran threatened its Gulf neighbors not to compensate for any shortfall in its oil exports if sanctions bite too harshly.

“We can easily get up to 11.4, 11.8 million almost immediately, in a few days,” Dow Jones Newswires quoted Saudi Oil Minister Ali al-Naimi as telling CNN in an interview. The country currently produces just under 10 million bpd now.

Saudi Arabia has promised repeatedly to fill any supply gap left if output from Iran or any other major producer is disrupted.

But “to get to the next [700,000 barrels a day] or so, we probably need about 90 days”, he said.

That would take Saudi Arabian output to its full capacity of 12.5 million bpd.

Naimi said the kingdom favors an oil price of $100 per barrel, identifying an ideal oil price for the first time in more than three years.

“Our wish and hope is we can stabilize this oil price and keep it at a level of around $100,” Naimi said.

Riyadh has not specified a preferred price range since it said it favored $75 per barrel in November 2008. Recently, however, Naimi has said that price level was out of date.

Iran has warned neighboring Gulf states not to compensate for a possible shortfall of its oil exports after it has been hit with Western sanction.

“If the oil-producing nations on the Persian Gulf decide to substitute Iran’s oil, then they will be held responsible for what happens,” Iran’s OPEC representative Mohammad Ali Khatibi was quoted as saying by Sharq newspaper.

“We would not consider these actions to be friendly,” Khatibi added.
Sanctions were imposed on Iran when European Union countries agreed in principle to embargo imports of Iranian oil as part of the latest Western efforts to turn up the heat on Tehran.

Tehran has threatened to close the Strait of Hormuz as tensions with the United States and its Western allies have escalated over the last month.
But Naimi said the vital export route is unlikely to be blocked for long, if at all; even so, he said the increase in tension between Iran and Western powers are disturbing and negative for oil markets.

“I personally do not believe that the Strait, if it were shut, will be shut for any length of time. The world cannot stand for that,” the oil minister.

Asked if he is concerned about the war of words between Iran and United States, Naimi said: “I don’t think all these pronouncements are helpful to the international oil market or to the price of oil. It’s really disturbing.”