Saudi Arabian Oil Minister Ahmed Zaki Yamani warned fellow OPEC members that world oil prices could fall below $20 a barrel if his kingdom raises oil output in the face of widespread overproduction and price discounting within the cartel, Petroleum Intelligence Weekly reported Sunday.
Yamani, in an exclusive interview with the authoritative oil journal, denied that Saudi Arabia--OPEC's largest producer--is threatening to flood the oil market.
He said Saudi Arabia, whose oil production fell to a 20-year low of less than 2.5 million barrels daily in May, has no alternative but to step up output because the kingdom has a serious shortage of oil revenues and natural gas. Gas is a by-product of oil production.
Yamani said that, if Saudi Arabia increases its production, oil prices will begin falling unless other members of the Organization of Petroleum Exporting Countries reduce their output to official quota levels and stop offering illegal price discounts.
"We do not think that prices will come down to $26 or $25 a barrel," the Saudi oil minister said. "Prices will drop sharply to something below $20."
Yamani said Saudi Arabia would like to give up its role as OPEC's swing producer, which means the kingdom must raise or lower output to defend world oil prices despite widespread violations of cartel guidelines by other members.
"There is no room whatsoever to swing downwards," Yamani said. "I am not happy with this swing role."