MercoPress. South Atlantic News Agency

Yamani: oil prices will remain at current record levels

Oil prices won't drop much from their current record levels unless the United States falls into recession, forecasted Saudi Arabian former Oil Minister Ahmed Zaki Yamani.

"I can't see a steep fall unless there's a collapse of the US economy which none of us wishes", added Mr. Yamani in London.

Oil prices have increased 32% since the end of 2004 and 50% in the last twelve months following fears that increased demand form emerging economies in Asia and the United States could put more pressure on world production which apparently is working at its top level capacity. Texas light crude reached Tuesday 57,40 US dollar p/b

In United States gasoline prices struck a new average record of 2,15 US dollars per gallon, 36,6 cents above the same week last year. Diesel reached 2,24 US dollars per gallon and in California, with the dearest gasoline, the price was above 2,32 US dollars.

However oil prices are still far from the all time record of 1980/81, when the barrel adjusted for inflation reached the equivalent of 90 US dollars.

Mr. Yamani said that Saudi Arabia should increase daily production to 10 million barrels, an additional 500,000 barrels, to help cool prices.

"Pushing production to 10 million barrels should help", argued Mr. Yamani who added that "four months ago Federal Reserve chairman Alan Greenspan and the Germans were telling us that high oil prices would not impact the economy. Now there saying that they will have an effect and I believe they will eventually. Oil prices are too high particularly for developing countries".

The Organization of Petroleum Exporting Countries which supplies half of the world's exports agreed last week to increase production by 500,000 bpd and is considering a further similar increase.

OPEC is almost at its record production in 25 years and non OPEC members are also believed to be pumping with not much remaining capacity.

Saudi Oil Minister Ali Naimi said that Riyadh was considering unilaterally increasing production from 9,5 to 11,5 million bpd, "if we have the clients".

But not only a tight supply/demand market and the weak dollar are fuelling oil's volatility: insufficient refinery capacity to address the coming northern hemisphere spring demand, possible labour disputes in Nigeria and the ever present Middle East explosive situation.