OPEC Ready to Trim Price of Heavy Oil : Cartel Reportedly OKs Cut of 50 Cents by Vote of 10 to 3

The Organization of Petroleum Exporting Countries reportedly voted 10 to 3 Wednesday night to cut the price of Saudi Arabian heavy crude oil by 50 cents a barrel.

But the decision was not formally announced, and the OPEC meeting will go into a fourth day this morning.

Discussions will also continue on a Saudi demand that the cartel increase the difference in price between heavy and light crude by charging 15 cents a barrel more for the higher-quality light. A bigger price difference would help Saudi Arabia increase its exports of mostly heavy crude, which must undercut light crude prices because it is of lower quality and costs more to refine.

Saudi Oil Minister Ahmed Zaki Yamani has been pressing hard for the increase, but it was generally expected that he will drop the demand when the meeting resumes this morning.

Voted No in January

Algeria, Iran and Libya--which produce mostly light crude and benefit more from the current prices--are holding out against any change. The three also voted against cuts last January that brought the benchmark price for Saudi light crude down to $28.16 per barrel.

Voting in favor of cutting the standard for heavy crude to $26 Wednesday were Saudi Arabia, Indonesia, Ecuador, Kuwait, Iraq, Bahrain, Qatar, the United Arab Emirates, Nigeria and Venezuela.

Regardless of the final decision, OPEC’s official price list would still be much higher than prices on the open market.

Oil on the spot market has been selling for as much as $3 less than the OPEC price in recent months, and Mexico’s decision two weeks ago to drop its price by $1.50 per barrel has put OPEC under additional pressure.

At the end of Wednesday’s late evening session, following committee discussions throughout the day, Indonesian Oil Minister and OPEC President Subroto emerged simply to say: “I beg you to bear with me to stay for another day in Geneva because we have not yet finished our work.”

Other conference participants quickly reported the split decision on the 50-cent cut in heavy crude and the expectation that this would be finalized today.

Oil analysts following the meeting here doubt that the cut will have much short-term effect, with the spot market currently stable at about a dollar under the OPEC price.

OPEC production is well below the 16 million barrels per day in agreed quotas for the 13 states, with Saudi Arabia now producing barely half of its quota--about 2.4 million barrels per day.