NEW YORK: Oil dropped nearly 2 percent as Saudi Arabia sought to knock back the price rise that has threatened the global economy, with the oil minister offering the most detailed argument to date that OPEC nation was prepared to meet any supply shortfalls.Brent crude settled at $124.12 a barrel, down $1.59 on the day and off earlier lows of $123.20. US crude fell $2.48 to settle at $105.61 a barrel.
Prices dropped after the Kingdom sought to soothe fears about high oil prices, saying that world supplies were well in excess of demand and that $125-a-barrel crude prices were not justified given the anemic state of the world economy.
Petroleum and Mineral Resources Minister Ali Al-Naimi said the Kingdom had satisfied all of its customers' requests for oil and stood ready to raise output to full capacity of 12.5 million barrels per day (bpd), if needed.
"I want to assure you that there is no shortage of supply in the market," Al-Naimi told reporters at a press briefing in Doha, Qatar. "We are ready and willing to put more oil on the market, but you need a buyer."
Oil is trading above $123, just $24 short of an all-time high, as tighter Western sanctions on Iran threaten to slow the country's exports.
"Oil prices today are unjustifiable on a supply and demand basis," said Al-Naimi. "We really don't understand why the prices are behaving the way they are."
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"From our point of view, we have had no customer not satisfied. We have satisfied every request for every customer that has come asking," said Naimi.
"We ask the customers, 'Do you need more?' and invariably the answer is 'No thank you.'"
Riyadh is now pumping 9.9 million bpd — the highest in decades — and is willing to produce at full capacity of 12.5 million bpd immediately, should demand warrant, Al-Naimi said. He said he expected output next month to stay at 9.9 million bpd. Saudi spare production capacity now stands at 2.5 million bpd, he said.
"We spent a lot of money building that capacity. We finished building it in 2009, and it is there to be used," said Al-Naimi.
Storage inside the kingdom was full and Riyadh was holding about 10 million barrels outside of Saudi Arabia in Rotterdam, Sidi Kerir and Okinawa, he said. "Our inventories both in Saudi Arabia and worldwide are full."