Much Optimism but No Results at Oil Summit : OPEC Ministers Divided on Plan by Non-Members

Oil ministers from an OPEC panel and seven non-OPEC nations ended their first-ever meetings Wednesday with optimistic statements that the cartel will at least partly match an offer by the non-OPEC group to cut oil exports by 5% in May and June.

But it remained unclear whether the 13-nation Organization of Petroleum Exporting Countries, meeting tonight to consider the proposed cut in output, would be able to overcome the objections of such dominant producers as Saudi Arabia and Kuwait.

Several OPEC observers, accustomed to the cartel’s past problems, predicted that even if agreement is reached, it would be widely disregarded once it had the intended effect of boosting oil prices.

Jack W. Wilkinson, chief economist for the U.S. oil producer Sun Co., observing the meetings, said that the plan could drive prices up by $3 a barrel but that prices would quickly fall back because there would be “leakage across the board” when the revenue-starved nations saw the chance to replenish coffers by pumping and selling more oil.

In fact, the plan has apparently suffered its first casualty already: Colombia did not sign the proposal despite the non-OPEC group’s claim Tuesday that the seven nations invited to the meetings here were unanimous in supporting the cuts. No explanation was offered, but it was generally suspected that Colombia, rapidly expanding its oil production capacity, saw nothing to be gained by cutting back as long as others are doing so.

But the two groups hailed their unprecedented meetings as the opening shot in a long-term cooperative effort, and several members of the non-OPEC contingent hinted broadly that they expected the six cartel members they met with Tuesday and Wednesday to recommend that the full OPEC membership agree to a comparable production cut. Such a recommendation would probably ensure approval.

The six non-OPEC nations--Mexico, Egypt, China, Angola, Oman and Malaysia--conditioned their 5% export production on OPEC cutting its exports by the same amount. Without Colombia’s participation, that could carve about 860,000 barrels per day from world markets.

Mexico Energy Secretary Fernando Hiriart Balderrama said he was “very satisfied” with the response of OPEC members at Wednesday’s meetings, and said Mexico could accept “minor modifications” of the offer. Any such modifications would presumably be worked out at the sessions of the full cartel beginning tonight.

There were enough potential holes in the possibility of an agreement--such as “modifications” that could water it down and lessen its impact on the world oil imbalance--that a U.S. oil trader here saw no good odds in making crude purchases on the bet that an accord will be reached and prices driven up.

“I’m not buying a thing yet. I certainly wouldn’t bet the ranch on this,” he said.

Iran joined Venezuela, Algeria and Libya on Wednesday in openly favoring a cut in production but the approach of OPEC’s regular mid-year meeting on June 9 gives the group an opening to delay any action until then, when seasonal demand is expected to rise sharply and no cutbacks in production might be needed.

The unusual April meeting resulted from a several-week slide in crude oil prices to as much as $5 below the official price of $18 for average OPEC grades of crude oil. About $3 of that decline has since been recovered by news of the special meeting, hostilities in the Persian Gulf, and evidence of higher-than-expected demand for oil products in industrial nations.

Commodities story, Page 4