By SUMMER SAID
DUBAI—Gulf oil producers, already facing a weakening demand picture in 2011 and 2012, are expected to cut their output once Libya resumes production, the Organization of the Petroleum Exporting Countries' top official said Monday.
OPEC Secretary General Abdalla Salem el-Badri, a Libyan, told a forum that Libya could reach pre-unrest production levels within 15 months, as few key facilities were damaged, and said he expects Saudi Arabia and other Gulf countries to cut output once Libya's production recovers, although he hasn't had confirmation of that from the individual producers.
Libya Restart May Not Increase Global Oil Supply
"When Libya will come to production, [Gulf] OPEC members will reduce their production ... no doubt about it," he said. "Right now I don't see anything, but as long as Libya starts to produce more and more I'm sure member countries will cut. It is in their benefits."
Mr. El-Badri's comments come amid renewed concerns about the global economy. On Monday light, sweet crude futures on the New York Mercantile Exchange for delivery in October were 1.6% lower at $86.58 a barrel in electronic trading. Brent crude was also lower.
Mr. El-Badri said Monday he sees rising negativity in the oil market amid greater concerns over weak U.S. growth, the European sovereign debt crisis and signs that the Chinese government will act aggressively to prevent overheating of its economy.
"There are a lot of precautions," Mr. El-Badri told the Gulf Intelligence energy forum. "Now we see that those negative elements are coming to the market."
Mr. El-Badri said he was surprised that crude oil prices are holding at current levels, which have a risk premium of $16-$20 a barrel priced-in due to the current conditions of the global economy and as Western stimulus packages fail to generate jobs and economic activity.
The International Energy Agency and OPEC last week reduced their forecasts for oil demand, although they differed on the outlook for Libyan crude. OPEC gave a more optimistic prognosis for Libya and suggested that individual producers could cut back.
Mr. El-Badri, a former Libyan energy minister and head of its National Oil Corp., said there is no answer yet as to whether he would return and work in Libya's oil industry after his term as OPEC secretary general ends, but said it was safe now for other oil experts to return to the country.