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 Muammar Qaddafi abandons his Tripoli stronghold and rebels hail the end of his rule, the oil industry is 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 and contained a surge in crude prices.
The Gulf delegate saw no need for production to be trimmed straight away once Libya returns.
“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,” the delegate said.
“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, suggested the delegate, a government official who is not authorized to speak on the record.
The group’s Gulf members Saudi Arabia, Kuwait, the United Arab Emirates and Qatar are typically the 12-member organization’s most moderate on prices.
Having provided extra barrels without a formal OPEC decision, they are likely to reduce their output quietly if they decide there is too much oil in the market.
Iran, OPEC’s current president and a price hawk, also appears not to be worried about the health of the market. Its OPEC governor Mohammad Ali Khatibi said on Tuesday OPEC does not need to hold an early meeting for now.
More views from OPEC on the Libyan restart are likely to emerge in early September. Many officials are away due to the Muslim holy month of Ramadan, which is expected to end around August 31.
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.
Libya pumped 1.6 million bpd before the war, almost 2 percent 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.
A senior Libyan rebel representative for reconstruction, Ahmed Jehani, in an interview with Reuters on Wednesday, said efforts to bring oil and other infrastructure back to normal would take at least nine months.
Any decision to cut output would depend on prices as well as on Libyan supplies, and prices at around $110 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.”
Brent is down almost $20 from its 2011 high of $127.02 reached in April. OPEC is unlikely to become concerned about a slide in prices unless it falls towards $90, delegates told Reuters earlier this month.