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Saudi minister: OPEC nations has capacity to produce surplus oil

By the CNN Wire Staff
Storage tanks at the Saudi Aramco oil facility in Dammam city.
Storage tanks at the Saudi Aramco oil facility in Dammam city.
  • 87 countries sign a charter to limit price fluctuations
  • Oil prices jumped 6% on Tuesday
  • Libya produces 1.6 million barrels of crude per day
  • Saudi Arabia's daily production is 8.4 million barrels
  • OPEC
  • Saudi Arabia

(CNN) -- Seeking to alleviate concern about rising oil prices, Saudi Arabia's oil minister said his country and other OPEC members have the capacity to produce surplus oil, Saudi Press Agency reported.

Saudi Arabia alone has a surplus of about 4 million barrels per day, the agency quoted Minister Ali al-Naimi as saying.

It was not clear from the news agency's report whether al-Naimi meant that Saudi Arabia is already producing an extra 4 million barrels or that it can, if the need arises.

On Tuesday, 87 countries -- including Saudi Arabia -- signed a charter to limit price fluctuations and stabilize the market.

The move came as oil prices jumped 6%. Prices spiked as high as $98 a barrel earlier in the session, as the crisis in Libya sparked concern that the turmoil roiling the Middle East could spread to other producing countries -- including Saudi Arabia.

"Now it's starting to look like the entire region's on fire, and it looks like it could spread to other parts of the region," said Peter Beutel, oil analyst with energy risk management firm Cameron Hanover. "This thing is getting worse and worse and worse, and it could spread to Saudi Arabia, and that's the big fear."

Libya's importance with regard to oil prices doesn't hinge so much on its oil-producing and exporting capabilities, said Beutel.

To put things in perspective, Libya produces about 1.6 million barrels of crude per day, compared with Saudi Arabia's daily production of 8.4 million barrels and worldwide production of 87 million barrels, he said.

But now the monarchy of Saudi Arabia, one of the United States' strongest allies and an island of stability in an otherwise tempestuous region, faces an uncertain future.

"Markets have always relied on Saudi Arabia to act as the swing producer, boosting output if supplies were disrupted elsewhere," said Win Thin, global head of emerging markets strategy for Brown Brothers Harriman.

The International Energy Agency, an industry group based in Austria, said Tuesday that it "stands ready, as always, to make oil available to the market in the event of a major supply disruption if alternative supplies cannot readily be made available via normal market mechanisms."

And OPEC has also said it stands ready to hold an emergency meeting to raise its output if needed.