OPEC Ministers Meet Privately to Put Lid on Production

Times Staff Writer

Key OPEC ministers met privately Friday to find a way of reining in their oil production plans, a task complicated by the demands of warring cartel members Iran and Iraq.

Apparently convinced that their original plan to produce 18.3 million barrels a day in the fourth quarter would drive prices below $18 per barrel, the ministers were seeking a compromise below that scheduled output, perhaps by simply extending the 16.6-million-barrel level scheduled for the third quarter.

The negotiations were conducted among a handful of OPEC member nations, with Indonesian oil minister Subroto and OPEC President Rilwanu Lukman of Nigeria acting as mediators and shuttling from hotel to hotel here. Two full ministerial meetings were canceled in favor of the private talks.

(Fawzi Shakshuki, Libya's oil minister, told reporters after a late Friday meeting with four other OPEC ministers that they had agreed the cartel production ceiling should be lifted to 16.6 million barrels a day on July 1 and retained through year's end. It currently stands at 15.8 million barrels daily.

(Reports that OPEC may hold its output below expectations sent prices on world oil markets soaring Friday. On the New York Mercantile Exchange, prices for August delivery of West Texas Intermediate, the U.S. benchmark crude, closed 60 cents higher at $20.24 a barrel.)

Because Iran isn't now capable of increasing its production to take advantage of a higher quota, one possible way to win over Iran would be to engineer some effective limit on Iraq's production. Iraq has refused to abide by the quota assigned to it under OPEC's otherwise successful December production and price-fixing agreement, and is due to sharply raise its production with a pipeline expansion this fall.

Both nations rely almost totally on oil revenues to fuel the war against each other, and their mutual demands for advantageous quota levels have been a continual threat to OPEC unity. Iraq refuses to follow the 1.4-million-barrel-per-day quota assigned to it by OPEC because it is about 800,000 barrels less than Iran's quota. Both nations are now producing an estimated 2.2 million barrels daily, subject to sudden reductions due to bombings.

A delegate from one of OPEC's biggest producers said that giving Iraq a quota matching Iran's might bring the Baghdad contingent into the fold. Iraq's biggest military supporters, Saudi Arabia and Kuwait, could effectively hold the Iraqis to the the quota by halting their shipments of "war relief" crude to Baghdad or interrupting the flow of Iraqi oil, which moves through a pipeline across Saudi Arabia.

"That is the most logical political solution," the OPEC delegate said.

But several OPEC observers said that approach would tamper with what has been a successful quota accord, and might open a can of worms.

Many predict that Iran will instead go along with a simple fourth-quarter production compromise that would support the current $18 official price and leave Iraq out of the agreement. In that event, the Saudis and Kuwait might agree under the table to quit shipping Iraq the revenue from 300,000 barrels of war relief crude that it now receives each day.

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