MercoPress. South Atlantic News Agency

Oil: Saudi Arabia to produce more.

Crude prices fell yesterday as the world's leading exporter Saudi Arabia said it could quickly bring online spare production capacity if buyers needed more oil.

US light crude hit US$56 a barrel, before ending at US$54.55, down 84 cents. London Brent crude was down 58 cents to US$54.39 a barrel.

US President George W. Bush met with Saudi Arabia's Crown Prince Abdullah at his Texas ranch on Monday to discuss rising oil prices. Adel al-Jubeir, a foreign affairs adviser to Saudi Arabia's Crown Prince Abdullah, said world oil supplies are adequate, but that the kingdom is willing to provide as much crude oil as buyers want.

Saudi Arabia is currently producing "slightly over" 9.5 million barrels per day, with between 1.3 and 1.4 million bpd in spare production capacity that could quickly be tapped, Jubeir said.

"The crown prince understands that it is very important ... (to) make sure that the price is reasonable. A high oil price will damage markets, and he knows that," Bush told reporters before welcoming Crown Prince Abdullah to his ranch.

Oil prices had risen since early last week, notching up gains of more than US$4 and coming within striking distance of the all-time high of US$58.28 set at the start of April as speculative funds surge back into the market.

Those gains had been supported by a spate of refinery problems that has raised fears that refineries may struggle to meet rising demand.

"There's really not a crude oil shortage," said Tim Evans, analyst at IFR Energy Services, said of crude stocks that have risen to the highest level in nearly three years. Gasoline futures traded as high as US$1.69 cents a gallon, after falling after the Saudi comments to US$1.651.

Traders said late last week a gasoline-making unit at a Conoco Phillips' refinery in Louisiana would be down for another week after failing to restart following maintenance, compounding other refinery problems in Texas and Kansas.

Top world exporter Saudi Arabia and other members of the OPEC cartel have boosted production in recent months to try and create a stock buffer for expected strong demand at the end of the year.

US retail gasoline prices have hit record levels in recent weeks.

High OPEC crude supplies have done little to calm fears of a gasoline shortfall this summer and a shortage of heating fuel at the end of the year.

Traders said US gasoline inventories, which fell unexpectedly last week, should be on the rise at this time of the year. Still, inventories in the world's biggest consumer are 5 percent higher than a year ago.

Iraqi oil officials said on Sunday the country's northern crude exports could resume in a few days if workers repaired the damage from a new sabotage attack that had delayed oil flows.

The pipeline to Turkey's Ceyhan port handled 800,000 barrels per day of Kirkuk crude before the 2003 US-led invasion of Iraq. It has been mostly idle since then as saboteurs regularly hit oil infrastructure in the north.