RIYADH: Saudi Arabia is willing and able to plug any oil supply gap and has the capacity to provide all types of oil, including the light, high-quality crude produced by OPEC member Libya, senior Saudi sources said Thursday. World oil prices have surged towards $120 a barrel as unrest grips Libya. Italian oil major ENI said Thursday the nation's output had fallen by 1.2 million barrels per day (bpd). Traders and analysts have said the loss of virtually all Libya's production is particularly serious because it is high-quality, easy-to-refine oil in contrast to the heavier crudes often associated with the Organization of the Petroleum Exporting Countries (OPEC). “Saudi Arabia is willing and capable of supplying oil of the same quality, either Arab extra light or through blending,” one of the sources said. “OPEC stipulates that it is able to supply all types of oil if needed,” the source added. “There is no reason for the price to go higher.” OPEC has yet to make any formal changes to its output policy. The Kingdom said at talks this week the market was still adequately supplied, but it was always ready to release some of its roughly four million bpd of spare capacity on to the markets in the event of a shortage. OPEC has officially held output policy steady since December 2008 when it implemented record supply curbs totalling 4.2 million bpd. As the oil market has risen, OPEC has unofficially increased the amount it produces above its agreed limits. Data supplied by Saudi Arabia showed its output reached the highest in two years in December, although its exports had dipped from the previous month. An industry source also said Saudi Arabia had large amounts of light crude, although he added Saudi Aramco had not yet issued new instructions to increase the rate of pumping. Early this week, Saudi Aramco invited journalists to Khurais oilfield and told them it could produce up to 1.4 million bpd of light oil. For European customers, the advantage of Libya is that it is only a short journey away across the Mediterranean. The sources said Saudi Arabia could shorten the journey time for its crudes by shipping them through its East-West pipeline and then to the Mediterranean and on to Europe. Some West African OPEC crude, such as from Angola could also be redirected to Europe, the sources said, while Saudi Arabia could temporarily send extra oil to Asia to compensate. Following the comment by Saudi sources, oil dropped sharply from 2-1/2-year highs near $120 a barrel Thursday. Brent crude hit a high of $119.79 early, dropped down to $110.51 in late trade. At 3:05 P.M. EST (2005 GMT), Brent traded up 23 cents to $111.48 a barrel. US crude settled down 82 cents at $97.28 a barrel, after touching $103.41, the highest since September 2008.
