OPEC’s Gulf members are unlikely to reduce oil output in the early phases of a restart of Libyan supplies, because it is unclear how long a significant recovery will take, a delegate from a Gulf OPEC country said on Wednesday.
While Moammar Gadhafi abandons his Tripoli stronghold and rebels hail the end of his rule, OPEC and oil companies are weighing the implications of a restart of Libyan supplies, which have slowed to a trickle during the conflict.
Extra oil from Saudi Arabia and other Gulf members of the Organization of the Petroleum Exporting Countries has helped to offset the loss. The Gulf delegate saw no need for production to be trimmed straight away once Libya returns.
After having provided extra barrels without a formal OPEC decision, the Gulf countries are likely to reduce their output quietly if they decide there is too much oil in the market.
“Let’s see when they completely come back with their output before the crisis. And then, OPEC will see whether it affects prices or stocks, and then it will take the right decision.”
“We can’t say now what OPEC will do. Are they going to take one month, three months, a year?”
OPEC may not make a decision until its next meeting in December, the delegate suggested.
The supply boost from OPEC’s Gulf countries came after other members including Iran, African countries and Venezuela blocked a Saudi-led proposal at OPEC’s last meeting in June to increase its output targets.
It has lifted OPEC output to more than 30 million barrels per day (bpd) in July, the highest this year, according to OPEC estimates, entirely offsetting the loss of Libyan oil due to the civil war.
Libya pumped 1.6 million bpd before the war, almost 2 per cent of world supply. Oil executives and analysts say some of that could resume within months after peace is established, while reaching pre-war output would take a year or more.
Any decision to cut output would also depend on the level of oil prices, which at around $109 a barrel for Brent crude are too high for supply curbs to be considered, the Gulf delegate said.
“Prices are still in the range of $100, so the price is still strong.”