Oil prices won't fall below $60 to $70 (Dh220 to Dh257) a barrel as this is the minimum level at which alternative fuels are economically viable, Saudi Oil Minister Ali al-Naimi said in remarks published on Sunday by Algeria's APS news agency.
"From now there's a line below which prices won't fall," the official agency quoted him as saying in an interview with Petrostrategies magazine.
He said this involved "the marginal cost of production of alternative fuels, whether that's biofuels or tar sands" which had a threshold "between $60 and $70", APS reported.
"If you take into account all the subsidies involved in the production of a barrel of biofuels, I doubt whether anyone could make money from that with a price lower than $60 or $70," he was quoted as saying, referring to the price of a barrel of oil.
He said that level signaled a line "under which the level of prices could not go".
US crude closed at $101.84 (Dh373.75) a barrel on Friday and London Brent crude finished at $100.10 (Dh367.37). Oil at these prices has piled pressure on the Organization of the Petroleum Exporting Countries (Opec) to refrain from cutting output when it meets in Vienna on March 5.
APS said Naimi challenged the "Peak Oil" theory favoured by conservative energy analysts who predict that world supply of oil, including unconventional oil, will peak in about 2010.
Naimi told Petrostrategies that continued exploration investment around the world would prevent the rapid exhaustion of supply.
He cited the example of Sauid Arabia, whose subsoil was "not entirely explored," APS reported.
He estimated that Saudi Arabia, thanks to continued exploration, might be able to find another 200 billion barrels of oil to add to its reserves.
But there was no justification for building output capacity beyond levels already planned, he said.
State oil firm Saudi Aramco aims to lift supply capacity to 12 million barrels per day, enough to meet 14 per cent of current world demand, by the end of 2009.
Naimi said last year that further expansion of Saudi production capacity may not be needed beyond 2009 as consumers grow more energy efficient and switch to alternative fuels.
Saudi Arabia holds the world's largest oil reserves and is expanding supply capacity to meet rising world demand at a time when higher costs are leading to delays and cancellations across the oil and gas industry. (Reuters)
Oil prices won't fall under $60-$70: Al Naimi