Saudi Admits Oil Discounts Violating Rules of OPEC

Saudi Arabia’s oil minister today confirmed that his country has begun offering price discounts on its crude oil in violation of OPEC rules.

Asked by a reporter whether he had signed contracts with buyers for such deals, Ahmad Zaki Yamani replied, “Yes.”

The minister said nothing more as he was whisked by his bodyguards into a conference room at OPEC headquarters, where the oil producers’ cartel opened a special conference to discuss requests by several member countries for a bigger share of sales.

Price Collapse Possible

Yamani said earlier today that he saw no chance that the Organization of Petroleum Exporting Countries could grant the requests from Iraq, Ecuador, Qatar and Gabon. He also said OPEC could not afford to increase its overall production ceiling, which now stands at 16 million barrels a day.

In an address opening the conference, OPEC President Subroto, the Indonesian oil minister, said a collapse in oil prices is possible and that OPEC is the only group that could prevent it.

“We in the organization are passing through a period of growing uncertainty . . . as a result of which the price structure could collapse with grave consequence to us all,” he told the ministers.

He said current market conditions demand “complete adherence to our production and pricing agreements, and not violations.”

In an apparent reference to the price discounts offered by the Saudis, Subroto said, “Individually and collectively, we should steer clear of commercial deals whose effect would only be retrogressive to our objective of stabilizing the market.”