Organisation of Petroleum Exporting Countries OPEC which boosted oil production to compensate for the loss of Libyan supply earlier this year must reduce output as Libya returns to world markets, a senior Iranian oil official said Wednesday.
Iran’s OPEC governor, Mohammad Ali Khatibi, said the continuing global economic crisis would have a negative effect on oil demand.
He predicted that Libya would soon be exporting some 400,000-500,000 b/d of crude and called on OPEC producers to rein in output.
“When oil demand falls and supply remains the same, oversupply can affect prices and it is necessary to manage the supply,” Khatibi said, quoted by official news agency IRNA.
“When the economic situation of industrial countries is not good and it is not likely for the oil price to surge, the oil price is at risk and management is necessary,” he said.
“Those member countries in OPEC which increased their output when Libya’s oil was not in the market should decrease their oil production when this country’s oil returns to the market,” he said.
“Continuation of oversupply by these countries will pressure prices,” he warned, adding: “These countries are not capable of tolerating oil prices below $90/barrel.”
Khatibi did not say which countries should rein in production. Several OPEC members boosted output in recent months as oil prices rose and as the uprising in Libya slashed Libyan production from close to 1.6 million b/d to virtually nothing. But OPEC kingpin Saudi Arabia accounted for the biggest increase. A senior Gulf source said last week that Saudi Arabia was currently pumping around 9.8 million b/d — 1.8 million b/d more than its quota under the previous output pact which became redundant in June.
Platts estimates show OPEC production falling to 28.84 million b/d in April from 29.57 million b/d in January, but then rising in subsequent months to 30.13 million b/d in August.
Saudi Arabia’s submissions to the Riyadh-based International Energy Forum’s database show Saudi crude production climbing from 8.514 million b/d in January to 9.756 million b/d in August.
Khatibi said that the approaching northern hemisphere winter would “probably increase demand to some extent and push up prices” but that oversupply from some producers would have a negative effect.
In addition, “the economic crisis of different industrial countries will have a negative impact on oil demand,” he said, referring to a “warning by the International Monetary Fund of another economic crisis to come soon.”
He said, however, that it was difficult to predict which of these factors would prevail in the market.
OPEC currently has no agreement on oil output levels, its June 8 meeting having dissolved in acrimony as Iran and several member countries blocked a Saudi-led push for an increase in actual production to meet anticipated higher demand in the second half of the year. OPEC’s Gulf Arab states now view the previous output pact as defunct.
Ministers are scheduled to hold their next meeting on December 14 in Vienna.
North Sea Brent crude futures prices have generally held above $100/barrel this year, peaking at an intra-day high of $127.02/b in early April. The front-month ICE Brent contract Tuesday settled below $100/b for the first time since February 8.
