Saudi Arabia did not trigger the request for an increase in oil production at a heated OPEC meeting last June, the cartel’s secretary-general, Abdallah el-Badri, said this week, despite reports that the kingdom had prompted the call for higher output at the time.
“It was generally assumed that Saudi Arabia had proposed an increase in output,” Badri said in an interview with Al Arabiya.
“But the reality is that it was OPEC itself that had initially suggested the rise and Saudi was one of the member states that simply agreed.”
Saudi Arabia, the cartel’s largest exporter and the only member state with significant surplus oil capacity, was expected by many analysts to “get its way” in the June meeting.
The kingdom had reportedly suggested a rise in output by as much as 1.5 million barrels per day (bpd) in order to reduce oil prices and support economic growth. The kingdom currently exports 6.2 million bpd, according to OPEC estimates.
But at the meeting, the talks broke down after Iran, Venezuela and Algeria – known as long-time price hawks – refused to consider an output increase, in turn keeping the oil price above $100 a barrel.
The Saudi oil minister, Ali al-Naimi, described the meeting the “worst ever,” and it ended with no decision to increase OPEC oil production, but instead to maintain an official production limit of 24.8 million.
When asked why Naimi said the contentious meeting was the worst yet, Badri explained that the conference had taken place in an unstable global economic climate that led to decisions being made that had unpredictable outcomes.
Since the meeting, the United States – a big purchaser of OPEC oil – received a credit downgrade, which reverberated negatively across global economies. Meanwhile, escalating unrest in oil-producer heavyweight Libya affected global oil supplies.
“Of course, we could not predict that the U.S. would be downgraded in the June meeting and it was a shock to OPEC when it happened,” Badri explained. However, he did not say whether a different decision would have been made had a credit downgrade been expected.
“OPEC did not know whether Libya’s oil production would strengthen or weaken at the time of the meeting also,” the OPEC official added.
When asked whether Libya’s new interim leaders – the National Transitional Council (NTC) – had initiated contact with OPEC, Badri said that the cartel is dealing with Libya’s National Oil Corporation, the country’s national oil company, which dominates the Libyan oil industry and has recently appointed a new director in the wake of the overthrow of Muammar Qaddafi.
“We have made contact with the corporation’s new chairman, Dr. Nuri Berruien, and he has been informing us of the situation via telephone conversations,” said Badri.
“The Corporation also sent a representative for one of OPEC’s recent technical meetings … Libya [with its new leaders] fully remains a member of OPEC. Even the United Nations has recognized the NTC and the new council has taken the former Libyan regime’s seat at the UN,” Badri added.
Since the unrest in the Arab world began, in early 2011, the country’s oil output and exports shrank as sanctions were placed on Col. Qaddafi’s now-fallen regime. The disruption had reduced by at least 400,000 barrels per day the country’s 1.6 million bpd output, according to Reuters calculations.
In February of this year, Saudi Arabia raised its oil production to plug the gap left by Libya.
Badri predicts that Libya, the world’s number 12 exporter, will return to 1.6 to 1.7 million bpd within 15 to 16 months.