OPEC Seen Moving Toward Agreement : 5 Non-Member Nations Support Effort to Cut Oil Output, Reverse Plunge in Prices

The Organization of Petroleum Exporting Countries appeared Wednesday to be moving slowly toward an agreement to cut oil production after getting the support of five non-OPEC states for joint action to stabilize the world market and reverse the plunge in oil prices.

But OPEC President Arturo Hernandez Grisanti, the Venezuelan oil minister, told reporters that it will be “another two or three days of hard work” before any firm decision is likely on production targets or a price range.

OPEC members are now producing about 16.3 million barrels a day, and conference sources said there is general agreement that this will have to be reduced to at least 15 million in order to have an effect on the present price level, about $14 a barrel.

The problem, though, is not so much deciding what has to be done as agreeing on how to do it. New production quotas must be set for the individual members, and all are suffering as a result of the decline in prices.

The five non-OPEC members who have agreed to cooperate in limiting production are Mexico, which pumps about 2.7 million barrels a day; Egypt, 700,000; Oman, 500,000; Malaysia, 450,000, and Angola, 300,000.

Representatives of the five met for most of the day with a special committee of five OPEC members under Grisanti’s chairmanship. It was the first such meeting in OPEC history, though on occasion non-member producers have sat in as observers.

Grisanti said in a statement that “we shared the same sense of responsibility vis-a-vis the international oil market, with a view to finding common ground to overcome our difficulties.”

He said that the atmosphere was “very positive” and that there is now optimism that “future consultations will be able to reach an agreement to stabilize markets and restore prices.” Saudi Arabia and other OPEC members have said the cartel needs the cooperation of non-OPEC producers if production is to be curbed.

None of the non-OPEC five was prepared Wednesday to say exactly how far it might go in reducing production.

Today, the 13 OPEC members will reconvene after spending the past three days mainly in bilateral meetings. These have not led to any substantive results, but they appear to have defined the problem.

As a result, a more optimistic note is being sounded by the ministers. The Algerian energy minister, Belkacem Nabi, is talking about “an excellent atmosphere” and agreement all around on the need for production cuts.

The Iranian representative, Gyolamreza Aghazadeh, said: “The present price is insufficient for all of us. The more we can cut production, the more we can increase the price. We would like to see the past level of prices restored. We are discussing how much production we must cut, but all of us know it is the only solution.”

The big question is whether OPEC can make enough of a dent in oil supplies to push the price back up while Britain and Norway continue to pump without restrictions. If the OPEC members agree to cut production and the market is slow to respond, then they will face the prospect of even less oil income and heavy pressure to break any agreement and pump and sell.

The OPEC ministers are well aware of a statement made Tuesday in London by Britain’s chancellor of the exchequer, Nigel Lawson: “There is no question whatever, and never has been any question, of (Britain) cutting back its North Sea oil production in an attempt to secure a higher price.”

Norway, the other major North Sea producer, is talking about a future reduction as a long-term conservation measure.

In the end, Saudi Arabia is likely to decide whether there will be lower levels of OPEC production, and the Saudi minister of oil, Ahmed Zaki Yamani, has yet to have his say here.