"CHEAPER THE BETTER?"

The comment drew criticism from some quarters, including a response from Japan's minister of economy, trade and industry.

"There are frequent comments by oil producers about $60-$75 per barrel," Toshihiro Nikai told reporters in Tokyo. "For us, the cheaper the oil price, the better."

But most analysts broadly agree with the Saudi view, saying they are worried about the consequences of under investment and the need to prevent a shortage in the years ahead.

They say the comments by Japan -- almost entirely dependent on energy imports and seemingly on course for its longest-ever economic contraction -- reflect a short-term strategic view.

As a key supporter of the U.N.-led Kyoto Protocol, Japan well understands the need to encourage energy efficiency, said Michael Lewis, head of commodities research at Deutsche Bank.

"In a downturn, you need any type of stimulus you can get and a lower oil price can help," he said. "But you need to find a stable 'sweet spot' which balances the need for exploration and the funding of alternative energy projects."

Stability in energy prices is essential for any sort of long-term planning, Lewis said, reinforcing comments by India's oil secretary, R.S. Pandey.

"As a major consuming nation we would like prices to remain stable and around this level," Pandey said on Tuesday. "What is more important is there has to be stability in prices. Volatility of the kind witnessed this year has been very bad."

"SWEET SPOT"

While the desired "sweet spot" for oil prices may be lower during a recession, when extra stimulus is needed, most oil industry economists say it is probably well above where oil prices are at the moment -- around $47 a barrel.

... contd.