Why OPEC needs oil cut of at least 500,000 bpd?

Opec should cut its oil output by at least 500,000 bpd, a Libyan oil official said, to tackle oversupply and support prices that have slid to a four-year low.

The 12-member Organisation of the Petroleum Exporting Countries meets on November 27 to consider adjusting its output target of 30mn bpd for the first half of 2015 and so far only a minority of members have called for an output cut.

“I would like Opec to cut production of at least half a million (bpd) as all studies indicate the need for that even before the fall in prices,” Samir Kamal, Libya’s Opec governor and head of planning at the Libyan oil ministry, told Reuters. “The oversupply is about a million.”

Kamal said he was not speaking on behalf of the Libyan government. Libya is struggling with two competing governments, each with its oil minister. Neither minister has commented on the Opec meeting.

Opec’s meeting is looking like one of its most important in years. Oil slid to below $83 barrel last week from $115 in June on abundant supply and concern of weakening demand, below the budgetary pain thresholds of many Opec countries.

The Libyan official said that his country deserved to be an exception to any Opec cut since it is working to sustain a recovery in production that has been hit by months of fighting and protests.

“You are aware of the situation of the country being out of the market for almost a year, facing budget deficits, so we should not be expected to cut our production which we are struggling to bring to the level of 1mn,” he said.

He said that in previous meetings, Opec ministers have shown sympathy with Libya’s troubles and “expressed that (they) will make room for Libyan production.”

With more than a month to go before Opec meets, there is little outward sign of momentum building around the idea of cutting output for the first time since the 2008 financial crisis.

Top Opec producer Saudi Arabia has been quietly telling market participants it is comfortable with lower prices, Reuters reported earlier this month. Kuwait has said an Opec cut is unlikely.