Global oil supply is exceeding demand by 1.5 million barrels a day, the chief executive of state-owned oil giant Saudi Aramco Mobil Refinery Co. said Thursday.
The assessment from the world's largest oil company came amid worries that crude-oil supplies will be squeezed when the European Union bars imports of Iranian oil on July 1 over Tehran's refusal to allow inspections of its nuclear program.
Iran is the world's third-largest oil exporter, exporting an estimated 2.2 million barrels a day before the EU sanctions were disclosed.
Saudi Arabia has ramped up production to make sure worldwide demand is met. The kingdom is currently producing crude oil at a rate exceeding 10 million barrels of oil a day, Saudi Aramco CEO Khalid Al-Falih said in an interview with Dow Jones Newswires.
Production "changes day to day, but it's over 10 million barrels right now," Al-Falih said. He also said there is "spare capacity able to be brought to market." Saudi Arabia pumped about 9.45 million barrels a day last October.
The increased Saudi production, which is in line with previous Saudi statements, leaves the nation with around two million barrels of spare capacity, according to analysts. Experts have said this is a thin cushion for feeding global fuel demand if supply problems surface.
Al-Falih spoke at the company's unveiling of Motiva Enterprise LLC's refinery expansion. The refinery is a joint venture between the Saudi oil giant and Royal Dutch Shell PLC.
The executive said Saudi Aramco will provide the 600,000-barrel-a-day Motiva refinery with 325,000 barrels of crude oil a day for the next few months as the refinery completes its unit testing. After that period, the refinery will buy crude oil from a variety of sources, he said.
The expansion came at a time when the U.S. fuel market seems stagnant, as a secular decline in demand combines with tepid economic growth. But the Motiva refinery, with its location on the Texas Gulf Coast, has the ability to import crude oil from a variety of locations and export the fuel to many parts of the world, Al-Falih said.
"This is going to be one of the most competitive refineries," Al-Falih said. "With its position on the Gulf, it has the ability for arbitrage. West Africa could develop into a market."
Copyright (c) 2012 Dow Jones & Company, Inc.
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