SAUDI ARABIA’s oil minister said his country was ready to pump more oil but it could not find buyers as the Kingdom’s high-sulphur crude was being rejected by Western refineries.

In a bid to quell the surging price of crude, Ali al-Naimi said Saudi Arabia was ready to pump more crude but gave warning to consuming nations that they needed to invest in new refineries to process Saudi Arabia’s “sour” crude.

“We have 500,000 barrels a day extra capacity and we are ready to produce now but there are no buyers. Consumer nations need to build sufficiently sophisticated refineries to be able to handle sour crude,” said Mr Al-Naimi, speaking at an oil conference yesterday in the Gulf.

The Saudi minister’s comments highlight emerging problem of high-sulphur oil reserves. “There’s a difference between sour and sweet crude and what’s on offer now is the light sour crude,” Mr Al-Naimi said.

Tightening emission controls over motor vehicles have increased demand from refiners for low-sulphur (“sweet”) crudes, such as North Sea Brent or Nigeria’s Bonny Light, which are easily refined into high-quality petrol or ultra-low sulphur diesel fuel.

However, supplies from Nigeria are likely to be under threat today from a general strike in the troubled West African state where the main labour union is protesting high petrol prices.

A shortage of sweet crudes, such as Brent and America’s West Texas Intermediate, has driven their prices to extraordinary levels. On Friday, Brent set a new record closing just shy of $50 a barrel.

A chasm is growing between the premium price of sweet crudes and the discounted price at which the bulk of the world’s oil is sold. The surplus of sour crude is hitting the price of Arab Light, a higher-sulphur crude that accounts for most of the Saudi exports, and the Kingdom has been forced to double the discount at which it is priced against Brent.

Russian oil, too, is being shunned for its sulphur content. Urals, the main blend of Russian export crude is now trading at more than $7 below the price of US Light crude, compared with just $2 a year ago.

According to oil industry experts, about 40 per cent of the world’s current crude output is “sweet”, but rough estimates of the proven reserves in the ground show more than 75 per cent is higher-sulphur “sour” crude. A shortage of refineries capable of converting sour crude into low-emission fuels suggests continuing price pressure on sweet blends and high prices for consumers.

“The world is going sour,” said Rafiq Latta of Petroleum Argus, a publication that monitors crude prices. “The only regions where there is room for expanding sweet production is West Africa and Algeria.”

North Sea and Texas oilfields have been the largest, easily accessible sources of low-sulphur crude but these are now in accelerating decline. For future oil supply, the world will increasingly look to the sour crudes of the Gulf and Russia.

A lack of refineries equipped to process sour crudes is the problem, according to Julian Lee of the Centre for Global Energy Studies. “America hasn’t built a new refinery since 1976,” he said.

Ever-tightening environmental legislation is adding to the pressure on refiners to buy premium crudes, Mr Lee said. Even refiners equipped to convert sour crudes are now finding it necessary to buy lighter, sweeter products to produce the new ultra-clean fuels.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive