SAUDI Arabia, the world's largest oil exporter, will increase crude production next month in response to rising demand from its customers and a request by US President George W. Bush to ease the strain of record prices.
The country will raise output by 300,000 barrels a day, or 3.3 percent, to 9.45 million barrels a day in June, Saudi Oil Minister Ali al-Naimi said in Riyadh on Friday, following a meeting between Bush and Saudi Arabia's King Abdullah.
"The president has asked the Saudis to produce oil to meet demand," Tony Fratto, a White House spokesman, said in Riyadh after Naimi's remarks. "He was reassured by the king that they have increased production as the market demands."
Crude oil futures traded in New York rose to a record about one hour after Bush landed in Saudi Arabia, Bloomberg News reported. They later settled at $126.29, an increase of $2.17, or 1.7 percent, though below the day's high after the promise to boost production.
Saudi Arabia is the world's largest oil exporter and the most influential member of OPEC. "It's just a token increase but it shows that the Saudis realize how important it is for the president to not come back empty handed," said Peter Beutel, president of Cameron Hanover Inc in New Canaan, Connecticut.
"This is about a lot more than oil. The special relationship between the countries is at stake," he said.
Earlier, before Naimi's remarks, US National Security Adviser Stephen Hadley said the Saudi policy was to supply extra oil only if customers needed it.
"On May 10 we increased our response to our customers by 300,000 barrels because they asked for it," al-Naimi said later. "So our production for June will be 9.45 million barrels per day. This is the request of about 50 customers worldwide."
In another sign of cooperation, Saudi Aramco, the kingdom's state-run oil company, and US-based ConocoPhillips said they will build and own a 400,000 barrel-a-day refinery in Yanbu on the Saudi Red Sea Coast, to be completed by 2013. Oil prices have doubled in the past year mostly on surging demand.