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Saudi Unlikely to Cut Soon Despite Oil Under $100

Source: Reuters 6/1/2012, Location: Middle East

Oil's fall below $100 a barrel is unlikely to trigger a swift supply cut from OPEC power Saudi Arabia, which is pumping at its highest rate in decades, because its budget can comfortably withstand a much lower price.

Others in the Organization of the Petroleum Exporting Countries, including Iran and Iraq, need a higher price than Saudi Arabia to balance budgets and they may call on Riyadh to throttle back when producers meet on June 14 to set output policy.

Having campaigned aggressively to bring down oil prices that were damaging global economic growth, Saudi Oil Minister Ali al-Naimi may be reluctant to turn down the taps just yet.

"If prices come down very severely before the meeting, there could be discussion of a cut," said a Gulf OPEC delegate, who declined to be identified.

Brent crude would have to drop below $90 a barrel to convince Riyadh and its Gulf Arab allies Kuwait and the United Arab Emirates of the need to consider curbing supplies, the delegate said.

Naimi began talking oil prices down in March as Brent crude moved toward a peak of $128 a barrel, lifting output to back his words. Brent traded down around $3.00 to below $99 a barrel.

With the United States, the UK and France threatening to release emergency stocks, Riyadh pushed output beyond 10 million barrels a day for the first time in 30 years.

Talk of an emergency reserve release by consumer countries has since gone quiet and Riyadh is unlikely to want to provoke it again ahead of U.S. presidential elections in November.

Gasoline costs, a leading issue for the election campaign, have dropped down the agenda with the fall in prices.

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