Saudi Arabia Opens New Field; Oil Drops Below $105 a Barrel

Saudi Aramco, the Saudi Arabian oil giant, will add an additional half a million barrels per day (bpd) to its production capabilities with the opening of the Khursaniyah field, the business newsletter Arabianbusiness reported. Saudi Arabia is the largest oil producer in the world and is sometimes referred to as the kingpin of the Organization of Petroleum Exporting Countries (OPEC).

OPEC is an intergovernmental organization made up of 13oil-producing countries and works to regulate the price and production of oil. With the opening of the new field Saudi Arabia's production capabilities are expected to rise to 11.8 million bpd. Riyadh, which is a strong regional ally of Washington, has been under increasing pressure by the latter to increase its oil output in order to combat the rising price of oil, which has hit consumers in the U.S.

The price of oil has largely been pushed up due to fears of an armed conflict between U.S. and Iran over Tehran's nuclear program, which Washington claims is a cover for producing nuclear weapons. Tehran maintains it is only interested in producing nuclear energy. Various members of the Iranian armed forces have on several occasions threatened to close down the Straits of Hurmuz, which is the exit point of the Gulf. This would halt all oil export from the region.

Meanwhile, despite the shutting down of oil production in the Mexican Gulf due to Hurricane Gustav, the price of a barrel of oil fell below $105 on Wednesday. The price fall is attributed largely to the strengthening of the dollar and a drop in demand for gas. The new national average in the U.S. for a gallon of regular fell to $3.681, which is 10 percent less than the all-time high of $4.114 recorded on July 17, various news agencies reported.

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