hr: Money

At the Jeddah Energy Meeting in Saudi Arabia Saturday, Ibrahim Al-Muhanna told CNBC’s Melissa Francis that production would increase significantly “by the middle of next year.”

The kingdom’s current total capacity of 11.3 million barrels per day is expected to increase to 12.5 million barrels per day, Al-Muhanna said. Previous estimates by the International Energy Agency put current Saudi capacity at about 10.8 million barrels per day. The Gulf nation has also become increasingly concerned that record oil prices could hinder growth in the U.S. and other major industrialized economies, potentially leading to a decline in oil demand and a sharp drop-off in prices.

While Saudi Arabia has been reluctant to drastically increase production, it has announced several small increases recently that it says were made to satisfy increased customer demand. The country has consistently said that it will produce enough oil to ensure the market is supplied.

The kingdom increased oil production by 300,000 barrels a day in May, and is expected to add another 200,000 barrels a day in July. Meanwhile, U.S. Energy Secretary Samuel Bodman said Saturday that insufficient oil production, not financial speculation, was driving soaring crude prices.

The U.S. and many other Western nations have put increasing pressure on Saudi Arabia, the world’s top oil exporter, to increase production. Bodman disputed that assertion Saturday, saying oil production has not kept pace with growing demand, especially from developing countries like China and India.

“Market fundamentals show us that production has not kept pace with growing demand for oil, resulting in increasing prices and increasingly volatile prices,” Bodman told reporters. “There is no evidence that we can find that speculators are driving futures prices” for oil.

Many countries around the world have experienced social unrest by populations angry that rising fuel prices have driven significant increases in the cost of food and other basic goods.

Bodman made clear that the responsibility for reducing oil prices did not simply fall on the shoulders of producing nations, saying consuming countries must increase energy efficiency and invest in the development of alternative fuels. But he saved his strongest words for oil producers like Saudi Arabia, who he said must step up long-term investment in production and spare capacity.