Saudi conference on oil prices ends inconclusively; Oil touches $142 per barrel; Oil sands to be considered as a source of oil reserves
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    • The much-hyped conference of producers and consumers convened by Saudi Arabia the previous week proved inconclusive in the end. Riyadh on its part did announce an increase in crude oil production to the tune of 200,000 barrels per day and a further expansion of their output capacity, if needed, in the coming years. The news however failed to make any dent in the spiraling oil prices that reached $135 a barrel. Reports noted that the market had already anticipated an immediate production increase and consequently, the possible impact of the Saudi announcement was limited. Some analysts had anticipated that the Saudis might announce a bigger increase, which was however not forthcoming.

    Having failed to form any consensus on how to deal with the price rise, the one-day conference further exposed the sharp fissures between the oil producers and consumers. While the big consumers such as US, Japan and Britain continued to maintain that poor oil supply was the cause of the price rise, the producers led by Saudi Arabia stressed on the role played by speculators. Both sides however converged in pointing out that rising demand from India, China and other developing countries was the main contributing factor. Saudi King Abdullah on his part called on the OPEC to pledge $1 billion to help developing nations deal with the effects of soaring energy costs. The Saudis themselves would contribute an undetermined share1.

    In other developments, the US Securities and Exchange Commission (SEC) announced that unconventional oil sources such as oil sands and shale would be included as reserves of oil and gas for the first time under new regulatory proposals issued on June 26. The proposal would allow companies to disclose their ‘probable’ and ‘possible’ reserves to investors, in contrast to only ‘proved’ reserves that they could disclose currently. Reports noted that the announcement was a response to significant changes in the oil and gas industry in the past three decades and was expected to have a significant impact on the oil markets, as reserves reporting - used as a key measure by investors for assessing a company's long-term financial prospects, had been a hugely sensitive issue in the past2.

    Oil prices meanwhile continued their rise, irrespective of the Saudi announcement of the production increase, and in spite of the slight fall in the wake of the Chinese decision to reduce subsidies on petrol in the previous week. Oil traded above $142 on July 27 after gaining $5 a day earlier3.

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