Oil demand will remain weak and OPEC may have to cut production in response as Libya returns to production, Secretary-General Abdullah Salem el-Badri told reporters today.
Answering questions at a question and answer session in Dubai, El-Badri stuck a bearish note on the prospects for the US economy, and said renewed crises in the Eurozone would weigh on oil prices. Together with resurgent production from Libya, there may be sufficient slack in supply to make a case for a gradual production cut from Gulf states to maintain current OPEC overall output, he said.
More broadly, el-Badri advocated “a new era of cooperation” between national oil companies and private international oil companies in arriving at a balance between affordable supply and revenues that enable investment decisions.
In its August Oil Report, the producers’ cartel said “the recovery of the global economy is losing momentum and is becoming less evident”, prompting a downward revision of 2011 economic growth forecasts for the wold economy from 3.7% to 3.6% and for 2012 from 4% to 3.9%.
Oil demand growth for 2011 was cut by 0.15 million bpd to 1.1 million bpd.
In the circumstances, el-Badri admitted he remains “surprised” at high oil prices in the face of economic woes, and believes the Libyan conflict added a risk premium to spot prices of up to $20 per barrel. Brent is currently trading at $116 per barrel.
The Secretary General – who hails from Benghazi, Libya – told assembled reporters that he does not believe there was much damage to Libya’s oil infrastructure during the war, and talked up the expertise in Libyan national oil companies. El-Badri expects Libyan oil production will hit 1 million barrels per day rapidly – the latest OPEC report estimates within six months – with pre-war production of 1.6 million bpd returning within 15 months.
El-Badri also confirmed that the producers’ cartel recognises the Libyan NTC as the legitimate government of Libya, despite objections from OPEC member Venezuela.
On Iraq, El-Badri said production progress is going “really well”. While declining to disclose the production figure OPEC had in mind at which to approach Iraq for re-entry to the quota system, the date he gave of 2012 suggests an output capacity level of around 4 million barrels per day, according to Iraqi Oil Ministry targets.Â
