RIYADH, July 1: Saudi Arabia, the world's largest oil exporter, is satisfied with the current level of world oil prices at around $35 and apparently wants to keep it at that level.

In a signal indicating that the kingdom has abandoned its support for the previous price band of $22-$28 and is targeting prices above $30, the Saudi oil minister Ali al-Naimi said in Riyadh, "I believe the current prices are fair and there is no reason to take any measures either to decrease or increase the production." He was talking to press here yesterday after a session of the International Energy Forum.

Opec fixed a target of $22-$28 four years ago. But since last November the oil price has been above that level for all but two days. The cartel, which controls roughly one third of the global crude market, began to discuss raising the band a month ago, at its Beirut meeting held on June 3.

It was reportedly also discussed at the Opec strategy setting meeting the next day after the Opec oil ministers met in Beirut. "The organization has tacitly lifted the lower end of the Opec basket target price band from $22 to $25-$26 and left prices above $30 per barrel," Joseph Stansilaw, president of Cambridge Energy Research, said recently.

The Saudi comments, coupled with concerns raised by Nigeria, Iran and Venezuela, are early signs that Opec may not go ahead with a 500,000bd increase in its quota when it meets in Vienna later this month.

The oil cartel raised the quota last month in Beirut by 2mbd, its biggest boost in almost seven years, to 25.5mbd, trying to cool down prices. It also agreed to raise it by an additional 500,000 in August, subject to review in Vienna.

Some Opec officials are worried over pumping of too much oil by the cartel. Last month, early estimates suggested Opec, excluding Iraq, produced more than 27mbd. The cartel has not pumped such volumes since the "second oil shock" produced by the Iranian revolution 25 years ago.

"While higher output levels should eventually lead to a restocking in inventories, the higher oil production level has significantly reduced the spare capacity cushion within Opec," analysts emphasize.

It is commonly believed that among the oil producers, only Saudi Arabia has now some spare capacity. Rest are producing at almost their peak level. Hence analysts feel that the supply demand balance is resting now on a 'knife edge,' and even a small disturbance in the long crude supply change affects the crude market sentiments significantly.