We noticed you're blocking ads.

Keep supporting great journalism by turning off your ad blocker.

Questions about why you are seeing this? Contact us

Font Size

- Aa +

Thu 24 Mar 2011 04:33 PM

Font Size

- Aa +

OPEC may raise supply in June amid Libya crisis, PFC says

'Mostly likely case' in Libya is a division of the country into two parts and a prolonged civil war, analyst says

OPEC may raise supply in June amid Libya crisis, PFC says
OPEC MOVES: Over the past two years OPEC members have unofficially reversed the production cut agreed in 2008 (Bloomberg Images)

The Organisation of Petroleum
Exporting Countries will give its most serious consideration to a
formal supply increase during a meeting in June since announcing record
production cuts in 2008, said PFC Energy.

Exports from
OPEC member Libya will face a “sustained” disruption even if leader
Muammar Gaddafi relinquishes power as security concerns deter foreign
companies from operating there, David Kirsch, PFC’s Kansas City-based
analyst, said on Wednesday in a telephone interview. The “mostly likely
case” in Libya is a division of the country into two parts and a
prolonged civil war, he said.

“This is
certainly the first production increase they’ll be discussing since
2008,” Kirsch said. “Under any scenario, even if Gaddafi were to depart
tomorrow, Libyan oil is going to remain at limited production for a
significant period of time.”

OPEC officials
including Saudi Arabian Oil Minister Ali Al Naimi have pledged to make
up for losses in Libya, where the International Energy Agency estimates
production has dropped to a “trickle” from about 1.6 million barrels a
day. OPEC, responsible for 40 percent of global crude supplies, has
kept its output quota unchanged since December, 2008.

Brent crude
traded around $115 a barrel in London today. Oil prices are not yet
sufficiently high to trigger demand destruction, he said. Brent would
need to trade at about $130 a barrel for two quarters before slowing
growth in Asia, the fastest growing region for fuel consumption, Kirsch
said.

It will be
“very, very difficult” for oil to attain and remain at $130 because
supplies of crude and products are still at elevated levels amid the
crisis in Libya, he said.

Over the past
two years OPEC members have unofficially reversed the production cut
agreed in 2008. The 11 nations bound by a collective quota of 24.845
million barrels a day pumped 26.52 million a day last month, according
to data compiled by Bloomberg.

OPEC’s members
are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria,
Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Iraq is
exempt from the quota system.

Arabian Business: why we're going behind a paywall

Real news, real analysis and real insight have real value – especially at a time like this. Unlimited access ArabianBusiness.com can be unlocked for as little as $4.75 per month. Click here for more details.