HOUSTON, Feb 8: Saudi Arabia’s oil minister said on Tuesday that today’s soaring oil prices were not sustainable long-term, but that prices must be between $45 and $50 a barrel for petroleum producers to meet global demand, which he estimated would grow by 1.4 million barrels per day over the next year.

Ali Naimi’s demand growth estimate for 2006 was about 400,000 barrels per day below a recent forecast by the International Energy Agency, and that likely contributed to Tuesday’s oil-price decline.

The Energy Department estimated Tuesday that world oil demand would grow by 1.6 million barrels per day in 2006.

Mr Naimi, speaking at an industry conference, said energy markets are volatile and prices are near $65 a barrel because the global supply cushion is too thin. He said Riyadh plans to boost its daily oil production capacity by 1.5 millions per day over the next four years to 12.5 million barrels per day.

However, Mr Naimi said plans for any growth beyond that have been complicated by “all the talk of not wanting our oil”, an apparent allusion to President George W. Bush’s recent State of the Union Address in which Bush called for the US to reduce its dependence on oil generally, and Middle Eastern oil specifically.

“Government policies aimed at reducing oil demand create another element of uncertainty for producers,” Mr Naimi said in his prepared remarks. “This added risk is detrimental to timely investment decisions.”

When asked to expand on this, Mr Naimi said with a smile: “It’s not a major bump, but something we have to take into consideration.”

Light, sweet crude for March delivery fell $2.02 to settle at $63.09 a barrel on Tuesday on the New York Mercantile Exchange.

The Saudi minister estimated that the world currently has two million barrels per day, “or less”, of excess production capacity — or not enough to keep markets calm that suppliers could offset a major output disruption.

“We would be more comfortable if we had between five and seven million barrels per day,” he said, assuming daily global demand of about 85 million barrels per day.

Mr Naimi also said the country was planning to build two new refineries in order to increase its exports of refined products, such as gasoline and diesel. Each of these plants would have capacity to refine 400,000 barrels of oil per day.

Combined with other investments in refineries around the world, including the United States and South Korea, Mr Naimi said Saudi Arabia planned to increase its refining capacity by 50 per cent over the next five years to some six million barrels per day.—AP