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Saudis give assurance on $25 a barrel crude

DAVOS - Leading Opec producer Saudi Arabia yesterday gave a categorical assurance that it is not targeting higher oil prices to counter the decline in the value of the dollar.

Saudi Oil Minister Ali Al Naimi told delegates to the World Economic Forum in Davos that Riyadh would continue to aim for a central $25 target for a reference basket of Organisation of Petroleum Exporting Countries crudes, well below its value now of $30.70 a barrel.

"I think a price of $25 a barrel for the Opec basket is the light price," Naimi said.

"In Opec in general and Saudi Arabia in particular we would like to see prices between $22-$28, as near as possible to $25, and to stay there. That is a goal," said Naimi.

The comments appear to signal a softening of policy from late last year when Naimi said higher oil prices were warranted because of the slump in the dollar, the currency of international oil trade, against other major currencies.

Earlier this week de facto Saudi leader Crown Prince Abdullah said Riyadh did not want to harm its trading partners and wanted "moderation" in oil prices.

Opec introduced a $22-$28 target range for its crude in 2000 but ministers started to express worries about the impact of the dollar's decline on group members' purchasing power when they last met in December.

Naimi declined to predict what decision Opec might take when it meets on February 10 to discuss output policy for the second quarter.

But senior Opec delegates said this week that a production cut, thought likely until recently, was now highly improbable because of high prices and lower-than-expected inventories.

World oil demand dips in the second quarter after peak northern hemisphere winter consumption.

Oil prices in January hit a post-Iraq war high, buoyed by a severe spell of cold weather in the United State and strong demand from China.

US light crude yesterday was up 17 cents at $35.10 a barrel.

Prices have found support from hedge fund speculators making a big push into oil and other commodities.

Industry estimates show Opec, responsible for half the world's crude exports, already pumping well above official output quota limits.