OPEC Split Over Way to Stabilize Oil Prices
Oil ministers of the 13-nation Organization of Petroleum Exporting Countries began their fifth meeting of the year here Monday, agreeing that OPEC must continue to restrict production to stabilize prices but remaining deeply divided over how this is to be achieved.
A temporary agreement reached at the last OPEC meeting in August to hold production to 16.8 million barrels per day expires Oct. 31.
Every member of the organization is aware that failure to renew the agreement or replace it with a new quota system will send world prices plunging again after having stabilized until the last several weeks at about $14 a barrel.
The simple solution, advocated by the ministers of Iran, Indonesia, Venezuela, Ecuador and others, would be an extension of the temporary accord for another two months or longer. But nothing is ever simple in OPEC. Some countries are pressing for bigger cuts, and others are pressing for bigger quotas. A long and acrimonious meeting probably lasting into the coming week seems likely.
At a brief opening session in the familiar setting of Geneva’s Intercontinental Hotel, OPEC’s president, Nigerian oil minister Rilwanu Lukman, expressed the “sincere hope that the results of this conference will follow very closely on the successful outcome of the last one.” But he added that renewal of the current agreement “is an option we have but not necessarily our prime objective.”
After only 30 minutes of general discussion, the ministers decided to form separate committees to discuss compliance with quotas under the 16.8-million-barrel production ceiling and to debate production levels for a possible new agreement. They then took a long lunch break and began discussing compliance with the present agreement early Monday evening.
The present production ceiling is reported to be holding up largely because Iran is unable to ship its full quota in the face of continued air attacks by Iraq on Iran’s shipping terminals in the Persian Gulf. The two nations have been at war since September, 1980.
The United Arab Emirates is believed to have been exceeding its quota by about 300,000 barrels per day, and Venezuela has acknowledged that it also has exceeded its quota through shipments from excess stocks that were built up before the agreement came into effect. Venezuela asserts, however, that it is now in line with its assigned quota.
Hard-line OPEC states--Libya, Algeria and Iraq--are advocating a cut to 15 million barrels per day to try to force world prices back up beyond $20 per barrel, but nobody is taking this proposition seriously. Instead, both Kuwait and Saudi Arabia are saying that they must have larger quotas than they are getting out of the current ceiling and that OPEC should also return to some kind of a fixed-price policy instead of letting the oil price float on the market as it has been doing since tumbling from $28 per barrel last December.
Asked if the present production ceiling would be extended, Ahmed Zaki Yamani, the Saudi oil minister, told reporters: “That’s a very big if. We have to reach a new agreement on quotas.”
