OPEC nations will ramp up supply to keep lid on oil prices, says cartel’s biggest exporter
Saudi Arabia and other OPEC nations including those in West Africa are willing and able to replace any lost Libyan oil as soon as companies ask for it, including crude of the same quality, a Saudi Arabian oil official said.
There is no reason for oil prices to rise because Saudi Arabia and OPEC won’t allow shortages to exist, the official said by telephone today, declining to be identified by name.
As OPEC’s statute indicates, it is the responsibility of the group to ensure that the market is well balanced and that there is no shortage of supply, the official said.
Exporters are under pressure to ensure adequate supplies to the market after violence in Libya, Africa’s third-largest producer, sent Brent crude oil futures in London to as high as $119.79 a barrel on Thursday, the highest since August 2008.
Brent retreated below $114 after the Saudi official’s comments were reported.
Some West African oil that goes to Asian markets can be redirected to Europe, and extra Saudi oil can go to Asia to replace the West African supplies, the official said. OPEC’s West African members are Nigeria and Angola.
The Paris-based International Energy Agency is closely monitoring the situation in Libya and is ready to release supplies from government-maintained stockpiles in the event of a disruption, according to a February 22 statement on its website. There is no change to this policy, an IEA official who declined to be identified said today.
Senior IEA officials are in a board meeting Friday, at which the need for emergency inventories may be discussed.
“The market is looking at the Saudi and IEA statements as declarations of intent, which isn’t the same as actually putting physical production on the market,” said Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas SA in London. “The market is now focusing on the potential of lost barrels, not only in Libya but Algeria, and the possibility of protests elsewhere that could easily lead to tightening supply.”
Popular uprisings have rocked the Arab world, ignited by the ouster of Tunisia’s president last month and fanned by the Feb 11 fall of Egyptian President Hosni Mubarak. Protests in Algeria, which produces 1.25 million barrels a day of oil, led to the Feb 22 announcement of an end to the state of emergency there. Turmoil has spread to Bahrain, Iran and Yemen.
OPEC collectively pumped 29.4 million barrels a day last month, according to Bloomberg estimates, and has about 5 million barrels a day of spare capacity. Most of the unused capacity is in Saudi Arabia, the organization’s biggest producer.
Eni SpA, the largest foreign oil producer in Libya, and other companies including Total SA and OMV AG said they were curtailing production and evacuating staff after clashes between troops and anti-government protesters in the past few days.
Eni’s oil and gas production in Libya has been halved to 120,000 barrels of oil equivalent a day, and the company may stop producing there altogether because storage tanks at export terminals are filling up, two people will knowledge of the situation said. The flow of gas to Italy from Eni’s Libyan fields halted this week.
Libya pumped 1.6 million barrels a day of crude last month, according to Bloomberg estimates. Barclay Capital estimates as much as 1 million barrels a day has been halted, while Goldman Sachs Group Inc. puts the disruption at 500,000 barrels a day.
OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. The group is due to hold its next formal meeting in early June.
We have been made dependent on Arabian Countries & the East African Countries for the Oil / Crude / Petrolium Products and economy of most of the Countries like us are heavily ruin due to controlled Production of Oil Products from these OPEC members and hence increased Prices.
They should honor the committment made to the world towards maintaining Un - Interrupted Supplies & controlled Prices for a period of atleast 12 months basis, so as to allow Poor Countries as well Growing economies like India should sustain the support towards piece in the South Asia Pacific region.