Escalating global crude oil prices are mainly driven by political reasons rather than the fear of shortages and increasing demand, Indonesia's energy minister said today.

Indonesia's Energy and Mineral Resources Minister Purnomo Yusgiantoro said supplies of crude were sufficient to meet demands and predicted it would outpace demand next year.

"The problem is not that supply and demand balance, the problem is the political situation that sometimes will push the oil price at the highest position," Yusgiantoro told reporters in Kuala Lumpur after a forum on investment in Indonesia.

Indonesia is a member of the Organization of Petroleum Exporting Countries (Opec) and Yusgiantoro said the group saw sufficient supplies in 2007.

"What we are predicting from the Opec stand point, (is that) the demand growth next year is about only 1.3 million barrels of oil per day, but the supply growth is 1.7," he said.

"So next year it's going to be an oversupply from the fundamental stand point," Yusgiantoro said.

Hope for ME peace

Opec has predicted world oil demand in 2007 is set to increase by 1.3 million barrels per day to reach 85.9 million.

The conflict in the Middle East has sent oil prices soaring to all-time highs above US$78 last month and Yusgiantoro said he wanted to see a return to a "normal trend" of US$50-60.

"What we believe today is the political premium (is) about US$15-20 per barrel that jacks up the oil price (to the) level it is today, about US$70," he said.

"We hope that the Middle East problem can be resolved soon so that we see the oil price back to the normal situations," he added.

Indonesia, an oil producer turned net importer, currently produces some 1.05 million barrels per day to meet energy needs of its huge population of 220 million.

Yusgiantoro said the consumption of oil was decreasing after the government reduced costly oil subsidies and Indonesians were turning to alternative energy sources.

The minister also said he expected a boost in crude oil production next year, with more oil fields becoming operational in the Madura Straits, and Ayong and the large Cepu oilfield in Indonesia's East Java province.

"With Cepu production I think Indonesian oil production will increase to about 160,000, 170,000 barrels of oil per day," Yusgiantoro said.

"So we believe that in the future years, there will be an increase in oil production," he said.