LEAD: OPEC to limit oil output as Libyan production rises

Dec 14, 2011, 15:09 GMT

Vienna - Members of the Organization of the Petroleum Exporting Countries (OPEC) agreed Wednesday to produce less oil while Libya ramps up its production to pre-civil-war levels.

The cartel's 12 oil ministers said after their Vienna meeting that the decision also took 'demand uncertainties' into account.

They referred specifically to the risk that the European debt crisis and inflation in developing countries could dampen oil consumption.

OPEC members agreed to limit their output to the current production of around 30 million barrels per day (bpd).

At the same time, officials said there was an informal agreement that those countries that have been pumping more oil than their previously agreed quotas would cut back while more Libyan oil enters the market, in order to maintain the overall ceiling.

Libya's output had reached 1 million bpd, OPEC Secretary General Abdalla Salem el-Badri said - some 600,000 bpd less than before the unrest started.

OPEC's head of research Hasan Qabazard confirmed that the other members of the organization would therefore have to reduce their output by this amount.

Saudi Arabia would be the main country to lower production, said Jason Schenker, a US analyst at Prestige Economics.

The Gulf state had stepped in to compensate for outages in Libya while rebels were fighting the government forces of Moamer Gaddafi.

OPEC's decision was aimed at maintaining the current price level amid Libya's return to the market and worries about global demand, according to Jason Schenker, an analyst with the US consultancy Prestige Economics.

'If supply outstrips demand, prices go down. It's simple economics,' he said.

OPEC's Qabazard said Wednesday's agreement was 'not cast in stone,' and added: 'I believe it's a gentleman's agreement.'

El-Badri said it would take Libya until June to return to its pre-unrest level of 1.6 million bpd, and that OPEC countries would reconsider the limit of 30 million bpd after that.

The oil ministers met as the European Union has been mulling an embargo on oil from OPEC member Iran.

'I don't think they will put sanctions against the export of Iranian oil,' Iranian Oil Minister Rostam Ghasemi told reporters, citing his country's close business relations with Italy and Greece.

Western countries have imposed punitive measures on Iran's oil industry in their bid to get Tehran to stop its controversial nuclear programme, but have so far stopped short of an outright oil ban.

Europe's benchmark oil brand Brent fell 2.72 dollars to 106.78 dollars per barrel by late Wednesday, after the US central bank said a day earlier it would hold off on measures to boost the economy.