Supply security, oil price to dominate Riyadh talks

Riyadh, May 2: Saudi Arabia and Gulf producers will soothe Asian consumer concern about oil supply security when they meet for talks on Wednesday, but are unlikely to heed calls to boost output in response to high prices.

Security of supply is a nagging worry in Asia, which buys 55 percent of its oil from the Middle East.

Each year of Asian economic expansion feeds growing demand for crude from the Middle East, home to 60 percent of the world's oil reserves.

For producers embarked on massive spending programmes to boost output in the long term, knowing that future demand will be there for their oil is equally important.

''The most important thing for consumers and producers is the security of energy,'' Saudi Oil Minister Ali al-Naimi said in a television interview ahead of the second meeting of Middle East and Asian oil ministers.

''Consumers are interested in receiving supplies at a suitable time and at the desired volume. As for producers, energy security is represented in securing a guaranteed market for their output.'' The meeting comes just days after the government of the world's largest oil exporter arrested more than 170 people suspected in a plot to attack oil facilities and military bases.

''Security of installations is an omnipresent concern in Saudi Arabia,'' said one diplomatic source on Tuesday. ''The threat is no greater than before.'' The price of oil will also be high on the agenda. London Brent traded at over a barrel on Tuesday, well over 30 percent up from a mid-January low.

Asian ministers may ask OPEC to open the taps and reverse some of the 1.7 million barrels per day cuts the producer group agreed late last year. Consumers have called on OPEC to help bring down the price and prepare for a seasonal rise in demand in the third quarter.

But Kuwait's oil minister on his way to the meeting said there was no need yet for OPEC to consider boosting oil supplies. The group would not hesitate to raise output when necessary, said Sheikh Ali al-Jarrah al-Sabah.

Sheikh Ali's comments were in line with statements from other OPEC officials, who have said the current price did not reflect a need for the group to pump more crude.

The ministers of six members of the Organization of the Petroleum Exporting countries will be in Riyadh. The meeting is a follow up to the first gathering of Middle East and Asian energy ministers in India in early 2005.

Reuters>