NOT A SUPPLY PROBLEM:

Oil prices fall after Saudis urge output rise (International Herald Tribune, May 11, 2004)

Oil prices fell Monday after Ali Naimi, Saudi Arabia's oil minister, urged the Organization of Petroleum Exporting Countries to raise its production ceiling by 1.5 million barrels a day when it meets on June 3.

Naimi said demand for oil is expected to increase in the second half of this year because of greater consumption from Asian countries. "We do not want to see oil prices at the level that they negatively affect the growth of the international economy or the demand for oil," the minister said.

"There's been a strong reaction to what the Saudis said about production, while the market ignored the attack on a major oil pipeline in Iraq," said Jim Steel, director of commodity research at Refco in New York. "This just underscores the enormous influence that the Saudis have."

Naimi's statement overshadowed the news that saboteurs had struck a pipeline linking Iraq's southern fields to its export terminals in the Gulf, sharply curtailing the country's exports.

Saboteurs on Sunday hit one of several "major" pipelines linking a storage facility at Al Faw on the Shatt al-Arab waterway with Basra and Khor al-Amaya terminals, from which Iraq exports about 90 percent of its oil, said Norman Szydloski, a U.S. adviser to the Iraqi Oil Ministry.

"The damage will take about two days to repair," Szydloski said by telephone from Baghdad.