Oil Prices Drop as OPEC Talks End in Failure

The Organization of Petroleum Exporting Countries failed again Monday, after nine days of trying, to agree on lower oil production levels that might force up prices on the world market.

As the oil ministers of OPEC’s 13 countries slipped out through the rear exits of the hotel where they had been meeting, the cartel’s secretariat issued a statement to the press that said:

“After having deliberated at length on the present market situation and on measures to be taken to restore stability in the world oil market, the ministers decided to adjourn and reconvene on April 15, in order to allow time for OPEC heads of delegation to consult with their respective governments, as well as with other oil-producing exporting countries.”

The news of OPEC’s inability to reach a decision on how to deal with the situation sent world oil prices plunging Monday.

$12-a-Barrel Oil

The price of the most popular grade of U.S. crude slumped nearly $3 a barrel to $11 in early trading on the New York Mercantile Exchange. It closed at $12.13, down from Friday’s $13.94 final price. Prices are now more than 60% below the level of last November.

There appears to have been general agreement from the outset that, to affect prices, OPEC would have to reduce production from around 17 million barrels a day to 14 million, but the apportioning of lower production levels was too painful for the individual members.

The OPEC president, Arturo Hernandez Grisanti of Venezuela, told reporters while running to his car that he had been instructed by his government from the beginning not to go along with a cutback of as much as a single barrel.

The oil minister of the United Arab Emirates, Mana Said Oteiba, told reporters before the final session began that “this whole conference is a joke.” He said that he would be demanding the 63% increase in the Emirates quota that had been agreed on last year.

Iran and Iraq, which are at war, refused even to consider cuts in their production quotas.

Until the ministers meet again next month, at least, the oil market will remain wide open to the pressures of supply and demand. Conference observers regard it as certain that prices will continue to decline.

Monday’s statement did not say where the April meeting will take place. It could be in Geneva again or it could be in Vienna, where the organization has its headquarters.

$28 Price Sought

An OPEC statement issued Friday said that the ministers were determined to work with non-OPEC producers to force the price back up to $28 a barrel. Measures to achieve this, the statement said, would be announced “in due course.” Hernandez told the press then that the meeting would end Saturday with no further action.

But, over the weekend, Sheik Ahmed Zaki Yamani, the Saudi Arabian oil minister, offered to cut his country’s production if others would follow his lead.

By Sunday night, Subroto, Indonesia’s oil minister who has only a single name, was proposing that the Saudi quota be reduced by about 20%, those of Venezuela, Kuwait and the United Arab Emirates by 16% and those of all the other members by 12.5%. But, by Monday morning, the proposal had been rejected.

Meanwhile, Chevron Chairman George M. Keller said Monday in Los Angeles that, despite OPEC’s failure to deal with the current situation, the cartel will eventually reach agreement and that crude oil prices could return to the $20-a-barrel range by the end of this year.

‘Modest’ Price Hike Seen

In an appearance before the annual meeting of the National Petroleum Refiners Assn., Keller said that the seasonally low demand for oil in summer will probably drive the OPEC nations together, resulting in “a meaningful if modest” price increase “to perhaps something like $20 a barrel by the end of the year.”

But, Keller added: “Don’t bet any money on this.”

Staff writer Donald Woutat in Los Angeles contributed to this story.