UPDATE 1-Saudi says world has enough oil as Libya in ferment

Mon Feb 21, 2011 7:14pm GMT

* Saudi deputy oil minister says market has enough supply

* Libya, Iran top oil officials not expected to attend IEF

* Oil price hits highest in 2-1/2 years

(Updates prices, adds comment)

By Amena Bakr and Asma Alsharif

RIYADH, Feb 21 (Reuters) - World markets have plenty of oil, top exporter Saudi Arabia said on Monday, as a wave of revolution that has already toppled two presidents tightened its grip on OPEC member Libya and drove prices to a 2-1/2 year-high.

Energy ministers arrived in the Saudi capital Riyadh on the eve of talks designed to narrow the gap between producer and consumer nations.

The formal agenda could be overwhelmed by concern anti-government protests will drive oil prices still higher.

Oil on Monday climbed above $106 LCOc1 as energy firms recalled international staff from Libya and spreading unrest shut down some 100,000 barrels per day (bpd) of production there. [ID:nLDE71K1NE] [O/R]

It was the first output disruption since popular unrest erupted in Tunisia, ousting its president, before spreading to Egypt, where it unseated Hosni Mubarak after 30 years of rule.

Libyan leader Muammar Gaddafi's four-decade-rule also appeared in jeopardy as protests reached the capital Tripoli for the first time. [ID:nLDE71K01F]

Saudi Oil Minister Ali al-Naimi will open proceedings at the International Energy Forum with a speech on Tuesday, but declined to comment to reporters on Monday.

His deputy Prince Abdulaziz bin Salman Al-Saud told a news conference on Monday the market had plenty of oil.

"We're much more focused on how the market balance is, is it sufficiently supplied? And the answer is 'yes, abundantly,' therefore does the situation warrant any kind of intervention? I don't think so," he said.

He also reiterated the long-held Saudi view $70-$80 was the fair price for oil

"It is justified because it enables producers to invest, it is justified because it does not harm consumers."

Even though oil prices are well above those levels, OPEC ministers have repeatedly said the market has enough supply and the Organization of the Petroleum Exporting Countries has no plans to meet formally to reassess output until June.

IRAN, OTHERS STAY AWAY

Iran, OPEC's second largest oil producer after Saudi Arabia and holder of the rotating OPEC presidency, was among several oil ministers who will stay away from Tuesday's talks, delegates said.

His anticipated absence was interpreted as another clue OPEC was not ready to react to rising oil prices with a formal output decision.

The group's supply policy has been unchanged since December 2008 when it agreed a record output cut of 4.2 million barrels per day.

Initially, it implemented the policy agreement rigorously, but as the oil market has risen, OPEC members have increasingly produced above their output targets.

They are now delivering only around half the promised curbs. [OPEC/O]

Libya's most senior oil official Shokri Ghanem was also expected to be absent from Riyadh, although his fellow countryman Abdullah Al-Badri, OPEC's secretary general, arrived there late on Monday.

He told reporters he would not answer questions until Tuesday.

Even if OPEC does not add any oil to the market, Saudi Arabia has around 4 million barrels per day (bpd) of spare capacity and has said it is always ready to supply extra oil in case of need.

Its output has been steadily increasing to well over 8 million bpd, although its exports have not. [ID:nLDE71F1TA]

Fellow Gulf producer the United Arab Emirates also said OPEC was ready to add oil if there was a need, but that the market was well-supplied. [ID:nLDE71K2AA]

Saudi Arabia's established policy of price moderation and ability to add oil to the market at short notice has underpinned a decades-long relationship with the world's biggest oil consumer the United States.

The United States will be represented at Tuesday's talks by Deputy Energy Secretary Daniel Poneman.

Asked by reporters on arrival whether he was worried about current price levels, Poneman said only: "We believe in the laws of supply and demand." <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Take a Look on [ID:nLDE71G1J8]

Graphic on Saudi crude output, exports, stocks: r.reuters.com/nam28r

Graphic on U.S. crude oil in different currencies: link.reuters.com/cam28r

Graphic on Brent crude oil in different currencies:

r.reuters.com/dam28r

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(Additional reporting by Reem Shamseddine and Humeyra Pamuk)

(Writing by Barbara Lewis, editing by William Hardy)

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