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OPEC Ministers to Try Again on New Production Quotas

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Times Staff Writer

With their economies reeling from the collapse of world oil prices, members of OPEC gathered Tuesday on this island resort in the Adriatic for yet another try at restoring stability and higher prices to the oil market.

The energy ministers of the Organization of Petroleum Exporting Countries have failed repeatedly in past meetings to adopt a common strategy that would drive prices up from the present level of about $14 a barrel. They appear to be no less divided today as their first formal session is scheduled to begin.

Most of the 13 OPEC members seem ready to follow the lead of Saudi Arabia, whose oil minister, Ahmed Zaki Yamani, believes that the group’s first task is to recapture what he calls its fair share of the world market by increasing production. At present, OPEC production is about 19 million barrels a day, the highest level in two years.

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But Algeria, Iran and Libya oppose the Yamani strategy and contend that the best course is to reduce production and create a scarcity.

The three dissidents reportedly met Monday night in private to reaffirm their position.

Although the continuing softening of the oil market that resulted from overproduction has severely damaged the economies of some poorer OPEC members such as Nigeria, it has wreaked havoc among cartel competitors such as Norway and Great Britain. Their offshore oil is far more costly to produce.

The Persian Gulf countries believe that the competitive pressure of continued high OPEC production will eventually force the non-OPEC exporters to join it in setting industrywide production limits that will force prices back above $20 a barrel.

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A special committee of OPEC ministers has contacted various non-OPEC exporters, including Norway, the Soviet Union, Egypt, Mexico, Angola, Oman and Malaysia, seeking commitments to coordinate production with the cartel. Although all have indicated a willingness to go along, none has been willing to make a firm pledge until the cartel demonstrates that it can enforce production discipline in its own ranks.

Britain, a major OPEC competitor, refused outright to coordinate production policy with OPEC, explaining that despite the current slump, prices are well above its North Sea production costs.

According to conference sources, OPEC is asking its competitors to reduce exports by at least 1.5 million barrels a day from the present level of 8 million barrels. But the non-OPEC producers are waiting for the cartel to spell out its own production limits.

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Thus, a prime topic at today’s meeting, and others that follow during the week, will be the establishment and enforcement of new production quotas for OPEC members. Sources said Yamani will urge a ceiling in the range of 18 million barrels a day, while the hard-line OPEC dissidents--Algeria, Iran and Libya--will press for a drastic cutback to shock the world market with scarcity and jolt prices upward more quickly than would the long-term Yamani plan.

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