Major oil producers must follow top exporter Saudi Arabia in increasing output to help tame high prices that threaten global economic growth, the chief economist for the International Energy Agency (IEA) said on Wednesday.
Oil prices, which at $109 a barrel already pose a "major risk" to the fragile global economy, could rise further to $150 in coming years if there is no more investment to boost oil output in the Middle East, said IEA's Fatih Birol. His comments come ahead of Wednesday's meeting of the Organization of the Petroleum Exporting Countries, where ministers are expected to agree to a new collective output target that legitimises a big increase in supply over the last six months.
"Saudi Arabia is the central banker of the oil market and the decision that they will bring more oil to the market is definitely a good one," Birol said. "I would like to see the move of Saudi Arabia followed by other oil producers and, more importantly, more investment needs to come in the key countries in the region."
Upon arriving in Vienna for the Opec meeting, Saudi Oil Minister Ali al-Naimi confirmed on Monday that the kingdom had pumped more than 10 million barrels a day in November, its highest in decades.
Saudi Arabia's output increase was timely, given rising demand, low global oil inventories and poor output from non-Opec producers, Birol said. High oil prices led the Paris-based IEA to reduce its forecast of oil demand growth by 40,000 barrels per day (bpd) next year to 1.26 million bpd in its monthly oil report on Tuesday.
One of the main drivers of oil prices this year was the loss of Libyan crude oil production following the uprising against then-leader Muammar Gaddafi.
Oil production was ramping back up at a surprisingly rapid pace, Birol said, and should fully recover to pre-civil war levels by the end of next year. Analysts say this will likely prompt Saudi to cut output within the next three months. "Relatively weak global demand growth coupled with the gradual recovery in Libyan output and a resumption in Iraqi output will lead to a Saudi pullback of at least 500,000 bpd by the end of the Q1 2012," said Greg Priddy, global oil analyst at Eurasia Group.
Libyan oil exports are set to rise to 290,000 barrels per day in December from around 227,000 bpd the previous month, the country's national oil company said last week. Before the war, Libya was exporting around 1.3 million bpd.