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Analysts: Saudi oil capacity strained

March 1, 2012 by  

NEW YORK, March 1 (UPI) — The ability of Saudi Arabia to keep major economies supplied with oil amid Iranian concerns will be put to the test, energy analysts said.

Saudi Arabia last year increased crude oil production to offset market disruptions from the conflict in oil-rich Libya. The Financial Times said activity at some Saudi Arabian oil terminals suggests the country is ramping up production to address a market crisis sparked by tensions with Iran.

“Kuwait and the United Arab Emirates are already close to their maximum production level, so it will all be up to Saudi Arabia,” Paul Tossetti, an analyst at PFC Energy, told the newspaper.

The Financial Times notes energy traders are divided over the effects of an increase in Saudi oil production. Some said more Saudi crude would lower prices while others said it would cut into spare capacity.

The International Energy Agency in January said Saudi Arabia was pumping more crude oil than it has in more than 30 years and domestic demand is expected to drag on spare capacity during the summer.

Mike Wittner, head of oil research at Societe Generale, told the Financial Times it remains to be seen how well Riyadh can handle the latest crisis.

“Maybe they can do it, maybe they can’t,” he said. “I guess we’re going to find out.”

Spencer Cameron

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