Opec oil output to drop as Libya production recovers

Reuters/Dubai

Opec members, who raised output to make up for the Libyan loss, will doubtless cut output again, according to the group’s secretary general Abdullah al-Badri

Opec producers that raised oil output to compensate for the shutdown of Libyan oilfields will certainly reduce production as the North African country’s output recovers, Opec Secretary General Abdullah al-Badri said yesterday. Saudi Arabia and its Gulf Opec allies raised their oil production in June after failing to convince other members to agree an increase in production to make up for the shutdown of Libyan oilfields since February. But Al-Badri, who was Libyan energy minister 1990-2000, said those Organisation of the Petroleum Exporting Countries members who raised output to make up for the Libyan loss will doubtless cut output again. “I can assure you that when Libya comes back, our member countries will reduce their production. I have no doubt,” he told the Gulf Intelligence Energy Markets Forum in Dubai. “I don’t need to speak to member countries... It is in their benefit,” he said when asked if he had sought assurances from Gulf Opec producers that they would reduce output again. According to the latest official data published by the Joint Data Initiative (JODI) yesterday, leading oil exporter Saudi Arabia cut production from 9.813mn bpd in June to 9.606mn bpd in July, but is thought to have upped output to 9.76mn bpd in August. Kuwaiti output remained unchanged at 2.6mn bpd in July, according to JODI data. Some Libyan oilfields have recently restarted production and al-Badri said 1mn bpd of Libyan crude output was likely within six months. Al-Badri, who headed Libya’s National Oil Corp (NOC) until 2006, said production in Libya could be back to pre-war levels in around 15 months. Overall production before the war was 1.6mn bpd. Al-Badri said the US economy was not growing as much as Opec had forecast it would in early 2011 and that US economic weakness, combined with European debt woes, were starting to affect oil demand. Western stimulus packages are not really working to generate jobs of economic activity in the US and Europe, he said. But Opec expects the Chinese economy to grow 8.5% next year, down from Opec’s 9% growth forecast for 2011, al-Badri said, supporting demand for Middle East oil in main export market Asia. He said that about $16-$20 of current oil prices is a supply risk premium, reflecting Libya’s output cut and jitters over other supply problems. Al-Badri said the International Energy Agency had assured Opec that the consumer countries of the OECD will not make a habit of releasing emergency oil stocks, after the consumer country group released stocks to dampen prices in June—a move widely condemned by oil producers in the group. “The IEA assured me that that is it, and that it will cooperate with Opec,” Badri said, referring to the surprise release of OECD oil stocks announced in the weeks after Opec failed to agree an increase in output. The IEA and Opec hope cooperate better in future, he said. Opec now recognises the National Transitional Council as Libya’s representative, Badri said, after the UN approved a Libyan request to accredit envoys of the country’s interim government as Tripoli’s sole representatives at the world body on Friday. “Opec will recognise the NTC... and they will sit in the same chair,” Badri told the audience. The Opec members that did not vote to officially recognise the interim government of Libya in New York on Friday may maintain bilateral relations with the ruling NTC, but the UN vote means the NTC now has a place at the Opec table.Oil slips on Europe debt woes, dollar gainOil fell more than 2% yesterday as mounting concern over the eurozone debt crisis exacerbated investor fears about the demand outlook for commodities. Oil slid with stock markets, copper and the euro, while the dollar index rose. Investors sought safer assets ahead of a US Federal Reserve meeting this week that may hint at further measures to bolster the world’s biggest economy. “Financial markets want a precise and clear plan on how to deal with the European debt crisis, but they are not getting it,” said Christophe Barret, global head of oil research at French bank Credit Agricole. “The economic backdrop is weak.” Investors are anticipating results from the two-day US Federal Reserve meeting concluding Wednesday and from a G20 gathering on Thursday and Friday, hoping for indications about steps governments and policymakers may take to restore market confidence. ICE Brent November crude fell $3 to $109.22 a barrel by 12.44pm (1644 GMT), having fallen as low as $108.87. US October crude, approaching expiration on Tuesday, fell $2.63 to $85.33 a barrel, after slumping as low as $84.93.