Opec will reach an agreement at the December meeting after acrimonious talks broke down in June, but the extent of discussion on the organisation's quota system depends on the state of the Libyan oil recovery, the organisation's top official said yesterday.
If "Libya starts to produce a meaningful quantity before the end of the year, then production of Opec will be discussed in the next meeting," Secretary-General Abdullah Salem Al Badri said.
"If Libya is still not able to produce that much of a quantity, then I think the Opec production will stay as it is, as the market requires," said Al Badri.
Al Badri's remarks came as Opec producers consider whether to modulate their output in response to the partial comeback of Libyan oil and deteriorating economic conditions that are crimping demand.
The organisation badly fractured in June after Iran, Venezuela and some other countries opposed a Saudi-led effort to boost output in response to expected consumption growth. In the end, the group did not formally boost output, but Saudi Arabia and other Gulf countries increased production in the wake of the Libya outage.
Al Badri did not predict what action Opec would take in December, but said he was confident the group's ability to coalesce as it has in the past when confronted with difficult market conditions.
"I have no doubt in my mind that (Opec) will set and reach a solution like the solution or decision we reached in Algiers," he said of the December 2008 meeting when Opec reached consensus in the wake of the financial crisis.
He said that Opec is currently "very worried" about the European debt crisis and weak US growth, but he does not see the need for an emergency meeting. He also suggested the group saw no reason to cut output imminently.
"What we are seeing at this time is demand will be lower, but not that much, only by 0.1 per cent, not enough to generate any action," Al Badri said.
Once Libyan output is restored "automatically the market will balance itself, there will be less need for other crude," he said. And Opec members, already facing a weakening demand picture in 2011 and 2012, will cut their output to the pre-Libyan conflict levels, Al Badri added.
He said that the market now has 58 days of forward cover, five or six days above the five-year average, and said that as the price differential between Brent and WTI is so big another reference crude must be found.
The secretary general said that Iraq could reach a production level in 2012 that may require Opec to reinstate the country in the formal quota system. Iraq is one of Opec's founder members, but has been exempt from quotas for years.