By Tabassum Zakaria and Matt Spetalnick
RIYADH (Reuters) - Saudi Arabia announced a modest increasein oil output on Friday after an appeal from visiting PresidentGeorge W. Bush but the news did little to douse oil prices thathit a new record earlier in the day.
On his second visit to the world's biggest oil-exporterthis year, Bush renewed his appeal for more oil from OPEC amidrising pressure at home to take action as record fuel pricesweigh on the U.S. economy.
Saudi Arabia said it had raised output by 3.3 percent lastweek, and was willing and able to raise output further but sawno customer demand.
"Customers, where are you? I want to sell oil but where arethe customers. I can't sell oil just to be stored at sea,"Saudi Foreign Minister Prince Saud al-Faisal told a newsconference.
Asked about Bush's response, Prince Saud said: "He wassatisfied."
Saudi Oil Minister Ali al-Naimi told U.S. officials thatincreased output would not reduce costs at the pump for U.S.motorists as soaring prices were mainly the result of a weakdollar, speculation and tensions in oil-producing countries.
Since Bush's last visit to Saudi Arabia in January, oilprices have jumped some $30 to a new record near $128 a barrelon Friday, adding to U.S. recession fears.
"Clearly the price of (gasoline) is too high for Americans... We have not enough supply and too high demand. Trying toget more supply out there is good for everyone," White Housespokeswoman Dana Perino said before the meeting.
"We have had sluggish growth; with lower oil prices wecould certainly have better growth."
COMMON GROUND ON IRAN
The United States, the world's largest energy consumer,also reached agreements with Saudi Arabia to help it protectits oil resources and assist it in developing peaceful nuclearenergy.
The announcement came as Bush ended a three-day trip toIsrael where he vowed to oppose Iran's nuclear ambitions.
Tehran says its programme is peaceful but Bush said itwould be "unforgivable" if Iran were allowed to get the bomb.
U.S. National Security Adviser Stephen Hadley said the twoleaders believed "Iran, working directly and through Syria, wasvery much behind what happened in Lebanon", where Hezbollah hasrouted fighters loyal to the government backed by Saudi Arabiaand the West.
They also discussed how to "confront Iran's negativeactions and behaviour and increase pressure on Iran".
Prince Saud said the two leaders would focus on Middle Eastpeace in further talks on Friday, saying that Saudi Arabia wasstill in favour of the creation of a Palestinian state.
He objected to Bush's outspoken support for Israel duringhis speech to the Israeli Knesset, in which the U.S. presidentreferred to the Israelis as "chosen people", saying that thePalestinians were entitled to rights as well.
"There are rights here and rights there. What is requiredis equality in dealings ... and not selectiveness in dealings"Prince Saud said.
The two leaders are trying to improve ties thatdeteriorated in the aftermath of the September 11 attacks in2001 and the U.S.-led invasion of Iraq in 2003.
As part of the new oil security arrangements announced onFriday, the White House said the two allies would conclude anagreement for broader cooperation between the Saudi InteriorMinistry and the U.S. government.
Apart from agreements to cooperate on nuclear energy andoil security, the White House said Saudi Arabia had agreed tojoin two global initiatives -- one to combat nuclear terrorismand another to fight the spread of weapons of mass destruction.
Bush travels on to Egypt at the weekend to meet Palestinianleaders, and before then he will press the Saudis to do more tosupport faltering U.S.-sponsored Israeli-Palestinian peacetalks. He wants to achieve a deal before he leaves office inJanuary, but the deadline is widely regarded as unrealistic.
(Additional reporting by Sohail Karam in Riyadh and SimonWebb in Dubai, Writing by Lin Noueihed, Editing by CatherineEvans)
