DUBAI, United Arab Emirates - Saudi Arabia can afford to sell its oil for $15 a barrel, about half the current market price, a former Saudi oil minister said Tuesday.
Saudi Arabia, the world's largest oil producer, said last week it plans to pump an additional 500,000 barrels in an effort to cool high prices. The kingdom says it wants a price of $25, but former oil minister Sheik Ahmed Zaki Yamani said $15 was a better target price.
OPEC President Ali Rodriguez, who has criticized the Saudi plan and said the cartel must act in consensus, is due in Saudi Arabia Wednesday for discussions about the planned production increase. Other OPEC members have also protested the plan.
The kingdom has been under pressure from the United States, the world's largest oil consumer and a close Saudi ally, to bring prices down. U.S. consumers have been demanding relief from soaring gasoline prices in the summer driving season, with prices soaring above $2 a gallon in some regions.
Despite two OPEC production increases, oil prices continue to hover above the $22-$28 range that OPEC is seeking for its crude basket - a compilation of several types of crude the countries use as a price benchmark.
West Texas intermediate crude - which trades at roughly $2 higher than the crude basket - was at $29.42, down 27 cents on the New York Mercantile Exchange Tuesday.
Yamani, who played a key role in founding and running the Organization for Petroleum Exporting Countries, suggested that Saudi Arabia should be considering a price of $15 a barrel, however.
''Anything below $15 is difficult to live with. But that price is very healthy for the country in the long run,'' said Yamani, Saudi Arabia's oil minister between 1962-1986. Prices above that level, he said, would lead consuming countries to look for alternative sources of fuel and make it more lucrative to prospect for oil.
Such a drop is unlikely to happen, however. Other OPEC producers see high prices as a godsend, and their economies would likely not be able to weather lower prices as well as Saudi Arabia.
While other OPEC members have been critical of the Saudi plan to increase production, Yamani - who now heads the London-based Center for Global Energy Studies - said that the cartel will line up behind it because of the kingdom's influence within the organization.
''It is not in their interest to let Saudi Arabia act alone. This will break the ranks. The rest of the OPEC countries will come on board with the Saudi demand in order to preserve OPEC's unity. They know the main power inside OPEC is Saudi Arabia. All Saudi Arabia has to do is show that it's serious,'' said Yamani.
He said that the additional oil about to come on the market will cool prices, but not enough to bring down prices for heating oil because stocks for middle distillates, which include heating oil, are still low.
''OPEC might need to act again in September if the price of heating oil is to come down,'' Yamani said.
Distillate and gasoline stocks remain well below 1999 levels, a situation that ''warrants serious attention,'' the International Energy Agency concurred Tuesday.
''This is not just a U.S. problem,'' said David Knapp, editor of the IEA's monthly oil report. ''It is really an Atlantic Basin problem. The European stocks of distillate and gas are also low.''
On Monday, President Clinton said he was moving to stockpile 2 million barrels of heating oil in the Northeast in an attempt to avoid a repeat of last winter's sharp jump in heating oil prices. The United States has 37 million barrels of heating oil in inventory, about half as much as a year ago, said Gene Sperling, the president's chief economic adviser.
OPEC, which next meets in Vienna, Austria, on Sept. 10, delivers about one-third of the world's oil supply. Its official output is 25.4 million barrels a day.
