Los Cabos, 19 June (Argus) — Saudi Arabia pledged at the Group of 20 (G20) summit today to tap 2.5mn b/d of spare production capacity if necessary to ensure world oil markets are well-supplied.
With the latest round of negotiations over Iran's nuclear program failing to produce a breakthrough and the US and EU poised to impose new sanctions on Tehran, G20 leaders welcomed “Saudi Arabia's readiness to mobilize, as necessary, existing spare capacity to ensure adequate supply.”
The leaders of the world's major economies pointed to the geopolitical risks that “might lead to a supply-side induced spike in oil prices, in an environment of limited spare capacity and modest inventories.”
They “welcome the commitments by producing countries to ensure adequate supply. In particular, we welcome Saudi Arabia's readiness to mobilize, as necessary, more than 2.5 million barrels per day of existing spare capacity.”
Saudi Arabia, itself a G20 member, produced 10mn b/d in May, up from 9.95mn b/d in April.
Saudi Arabia's striking declaration of its ability to supply the markets come just one day after Saudi King Abdullah bin Abdel-Aziz named defense minister Prince Salman bin Abdel-Aziz as the new crown prince and deputy premier, following the death of Prince Nayef bin Abdel-Aziz. Prince Ahmed bin Abdel-Aziz becomes the new interior minister. US defense secretary Leon Panetta will lead a delegation to Saudi Arabia tomorrow to express Washington's condolences.
Saudi Arabia's assurances about its ability to supply the market comes as negotiators from the US, UK, France, Russia, China and German, along with EU, ended two fairly disappointing days of talks in Moscow with their counterparts from Iran.
The negotiators agreed to hold a technical-level meeting in Istanbul on 3 July to clarify the proposals made by the two sides during those talks.
Catherine Ashton, the EU's high representative for foreign affairs, said after the technical meeting she will contact Iranian supreme security council secretary Saeed Jalili to discuss the “prospects for a future meeting at the political level.”
Ashton said “the choice is Iran's. We expect Iran to decide whether it is willing to make diplomacy work, to focus on reaching agreement on concrete confidence-building steps, and to address the concerns of the international community.”
At the G20 summit, world leaders pointed to “excessive” price volatility in energy markets as an “important source of economic instability.” G20 finance ministers are scheduled to meet in November and will review the International Energy Forum's (IEF) report on the improving the JODI-OIL database. They also will discuss a report being prepared by the IEF, the IEA and Opec on the transparency of international gas and coal markets.
The G20 member countries long have pledged to phase out “inefficient” fossil fuel subsidies. The leaders today reaffirmed their commitment “to rationalize and phase out inefficient fossil fuel subsides that encourage wasteful consumption over the medium term while providing targeted support for the poorest.”
Releasing their “growth and jobs action plan,” the G20 countries pointed to host country Mexico, as well as India and Indonesia, as countries that “need to continue their reforms of major subsidies.”
Mexico had insisted that “green growth” be part of the G20 conversation. Mexican President Felipe Calderon pointed to the launch of the Green Growth Knowledge Platform to identify opportunities for investment and help developing nations develop renewable resources and technologies.
Calderon said fostering of green growth will be one of legacies of the Los Cabos summit.
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