OPEC looks set to pump more crude oil if Libyan oil supply is disrupted, to help prices move back below US$100 per barrel, according to key oil traders and Gulf figures. On Tuesday, Reuters reported Saudi Oil Minister Ali al-Naimi's assurance to Nobuo Tanaka, executive director of the International Energy Agency, that the kingdom would take action in the event of supply disruption. Naimi's deputy said the market had plenty of oil, while a Gulf delegate yesterday said OPEC's policy was clear. "If there is a shortage in the market, it will be filled by OPEC. Right now, there is no shortage," the delegate said. Ian Taylor, Chief Executive of Vitol, the world's biggest oil trading house, told an industry event during London's annual International Petroleum week that oil prices could rise further in the short term. "There is huge and unexpected political uncertainty in most parts of North Africa and the Middle East and this can be expected to support prices," Taylor said. But he said the Organization of the Petroleum Exporting Countries was likely to step up output if there was a sharp reduction in supply. "We all think they (OPEC) will move quickly if there is a significant disruption in Libya," Taylor said. "If OPEC puts more barrels into the market, as we expect to happen at some time in the first half of the year, prices should stabilise below current levels and move back to a price range around $90 to $100," he added. Others warned a new-jerk supply boost could be counter-productive. "I don't think OPEC will take any action to raise production now because a rise in output would put the market in panic and prices would rise further," one delegate said at a meeting held in Riyadh attended by over 80 oil producing and consuming countries. Oil markets rose by 6 per cent or around $6 to a peak of $108.70 on Monday after the kind of popular revolt that ousted leaders in Tunisia and Egypt erupted in OPEC member Libya. The market was still above $107 on Tuesday. The scale of unrest in Libya has provided the biggest jolt yet to oil markets in the two months of turmoil. Until it spread to the capital Tripoli this week, many in the oil world has assumed the country's oil wealth would be enough to contain unrest. The Libyan upheaval is also particularly significant to oil markets because it has disrupted supply and, although the amount affected so far can be replaced, concern has grown about how far the contagion could spread. The almost unthinkable scenario would be supply disruptions from Saudi Arabia, which providees around 10 per cent of the world's oil and also holds most of the world's spare capacity. It is the only producer able to respond quickly with large volumes of oil to compensate for a serious supply outage. Oil prices are still well below the all-time high of more than $147 a barrel touched in July 2008. The pace of that rally prompted Saudi Arabia to call emergency talks in its Red Sea port of Jeddah and pledge to supply more oil if the market needed it. In the immediate aftermath, the market rallied further before world financial crisis sent it crashing down to little more than $30. OPEC in response agreed its biggest ever output cut in December 2008 and has not formally changed policy since, although it has progressively increased production above agreed targets. The group is not scheduled to meet formally to reassess output policy until June. The market is much better supplied and has higher levels of inventory than it was in 2008 when emerging China, the world's second largest oil consumer after the United States, led a surge in demand. But the levels of geopolitical risk are more alarming. "I think regional stability is blowing all concerns about price off the table for now," said analyst Bill Farren-Price of Petroleum Policy Intelligence. "They don't want a repeat of 2008 but frankly that is in second place to maintaining stability, which is top priority right now."
