Saudis To Increase Summer Oil Production

Saudi Arabia will raise its production of oil in June and July, CBS News has learned.

Reports that the world's largest oil-producing country is about to announce an increase in production were confirmed by the United Nations Secretary-General.

Speaking to CBS News Foreign Affairs Analyst Pamela Falk, Secretary-General Ban Ki-moon said on Sunday that the Saudi oil minister confirmed to him that the government will increase its oil production to 9.7 million barrels a day, with a cumulative increase of 500,000 barrels over the course of June and July, a slight clarification of earlier news reports.

The new production figures, Falk said, would actually represent an increase of 300,000 barrels a day in June, and 200,000 in July.

Reports this weekend by The New York Times and the Middle East Economic Survey, an industry publication, had said Saudi Arabia's oil production would be increased to 10 million barrels a day, the country's highest ever.

Adviser Ibrahim al-Muhanna told The Associated Press on Saturday that he could not confirm the reports, but added: "Minister Ali al-Naimi will clarify this tomorrow."

The Secretary-General met with the Saudi King, Abdullah Bin Abdulaziz, to urge him to address the political instability that results from rising oil prices and, after the meeting, he expressed optimism about the opportunities that the Saudi government is considering to address the problem, reports Falk.

"An oil production increase by the Saudi government may not significantly bring down prices at the pump," said Falk, "but it will ease the rising cost at least temporarily, and lessen some of the U.S. Congress' angry response, including threats to block U.S. arms sales."

"Within the region, it may be more diplomatic for the Saudi government to increase production after discussions with the U.N. than to respond to Bush administration overtures, which it has rebuffed," Falk added.

Saudi Arabia has called for a meeting of oil producing and consuming countries on June 22 in the port city of Jiddah to discuss ways of dealing with soaring energy prices.

The New York Times report on Saturday, citing unnamed analysts and oil traders briefed by Saudi officials, said the production increase was to be announced following the meeting.

The Middle East Economic Survey said Friday that Saudi Arabia was considering a production increase, but did not provide a source.

The Saudis are concerned that sustained high oil prices will eventually slacken the world's appetite for oil, affecting them in the long run.

Crude prices have reached record highs, surpassing $139 per barrel on June 6 after surging nearly $11 in the biggest single-day price leap ever.

The prices had receded by Friday, with the benchmark light, sweet crude for July delivery falling $1.88 to settle at $134.86 on the New York Mercantile Exchange. In London, July Brent crude lost $1.84 to settle at $134.25 on the ICE Futures exchange.

Meanwhile, the average national price for a gallon of regular gas in the U.S. rose to a record $4.066 Friday, from $4.06 a day earlier, according to AAA and the Oil Price Information Service. Diesel also set a new record, rising 0.2 cents to $4.796 a gallon.

Even with record highs in the U.S., prices remain far cheaper than in Europe and some parts of Asia. Oil-related protests have swept Europe, with fishermen staging strikes in Spain, Portugal, France, Belgium and Italy. Several Asian countries, including India, Indonesia and Malaysia, have slashed fuel subsidies, raising prices for millions of consumers and sparking demonstrations.

Wrapping up a summit in Japan on Saturday, finance ministers from the Group of Eight nations - Britain, Canada, France, Germany, Italy, Japan, Russia and the U.S. - urged oil-producing nations to increase production.

The current president of the Organization of Petroleum Exporting Countries, Chakib Khelil, has said that the cartel will make no new decision on production levels until its Sept. 9 meeting in Vienna. OPEC ministers often follow the lead of the Saudis when discussing whether to increase production to take the pressure off rising prices.