OPEC Drops Its Effort to Control Prices, Output
The Organization of Petroleum Exporting Countries abandoned its effort Monday to control prices and production and declared that it will now work to “secure and defend for OPEC a fair share of the world oil market.”
Oil ministers of OPEC’s 13 member countries concluded a three-day meeting, the sixth since last December, without taking any action except to set up a study group that is to recommend, next June, steps aimed at preserving OPEC’s shrinking share of the market.
Even this was opposed by Iran and Algeria; both refused to serve on the study committee.
Breached or Ignored
As for prices and production quotas, a statement issued after the final session said the conference “reaffirmed all its previous resolutions.” But since all these have either been breached or ignored by almost every member in the last six months, the reaffirmation seems meaningless.
Even before the meeting ended, what amounted to a free-for-all erupted in the market. The price of North Sea crude oil declined by $1.20 a barrel Monday in the spot market at Rotterdam.
The Saudi Arabian oil minister, Sheik Ahmed Zaki Yamani, predicted when the weekend meeting opened that prices could fall by $5 to $8 a barrel in the coming months.
‘Barrel for Barrel’
Among OPEC members, there is a growing attitude of every country for itself. This was typified by a comment from Nigerian Oil Minister Tam Sokari David-West, who said, “We have a hundred million people to feed, and we will meet the North Sea threat barrel for barrel and cent for cent.”
OPEC discipline on prices and production has broken down in the last three months, owing in part to a brief rise in both demand and prices. Since the last meeting of OPEC ministers, in Vienna in October, oil companies have been replenishing depleted stocks and preparing for the usual upswing in winter demand. As a result, OPEC production has risen from its agreed-on ceiling of 16 million barrels a day to around 18 million.
Much of the increased output has been due to a spurt in Saudi Arabian production, the result of a series of special discount deals. The Saudis’ output has gone from a low of 2.5 million barrels a day back up to their OPEC quota of 4 million daily.
Spot Price Falling
But others in the organization have been ignoring their quotas and selling what they can. In the last three weeks, as a result of this flood of oil on the market, the spot price has begun to fall.
Yamani is forecasting something close to a market crash in the spring, when demand usually drops. This was understood to be one of the reasons that OPEC decided to wait six months before holding another ministerial meeting--although it could call an emergency meeting before June if conditions seem to warrant it.
At a news conference Monday, the new OPEC president, Venezuelan Oil Minister Arturo Hernandez Grisanti, was asked what will now happen to OPEC quotas on prices and production. In reply, he said only that the conference “reaffirmed all its previous resolutions.”
Fair Share of Market
Asked what means OPEC has to secure a fair share of the market against competition from North Sea oil and Soviet oil and from other non-OPEC producers such as Mexico and Egypt, he would say only that “OPEC still sells 60% of the oil that moves on the international market, and this gives us considerable strength to maintain our own position.”
He said that OPEC would regard something between 16 million and 18 million barrels a day as a fair share of the world market.
OPEC’s members are Algeria, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.
