OPEC Officials Again Fail to Agree on Cuts : Saudi Counterproposal to Reduce Output by 1% Rejected by Cartel
OPEC ministers failed again early today to reach agreement on a cut in oil production as a counterproposal from Saudi Arabia was rejected by a majority of the cartel’s 13 member nations.
The powerful Saudis have been the chief obstacle as the Organization of Petroleum Exporting Countries seeks to forge an alliance to cut production with six non-OPEC nations led by Mexico and Egypt. The oil-producing nations are seeking to bolster world prices.
The non-OPEC group offered earlier this week, at an unprecedented meeting with cartel leaders, to cut exports by 5%, or about 183,000 barrels a day, in May and June if OPEC also cuts exports by 5%.
But in three subsequent days of meetings, the OPEC group has been whittling away at the volume of oil it might be willing to cut--from 5% to a 2.2% proposal and now, via the Saudi proposal, by barely 1%. The Saudis proposed cutting output barrel-for-barrel with the non-OPEC group, or 183,000 barrels.
As explained early today by Iranian Oil Minister Gholamreza Aghazadeh, the Saudis further insisted that the 183,000-barrel cut be spread equally among all 12 participating OPEC members. That would mean the Saudis, OPEC’s largest producer at a current 4.3 million barrels per day, would cut output by the same 15,250 barrels per day as tiny Gabon, whose daily production is running about 175,000 barrels.
Willingness to Negotiate
Unacceptable though the Saudi proposal was to eight OPEC members, who earlier backed a proportional reduction totaling 300,000 barrels per day, it at least signaled a willingness by the Saudis to negotiate. Another meeting is scheduled for tonight.
Hisham Nazer, Saudi Arabia’s oil minister, refused to comment on his proposal except to say, “We’re still studying the issue.” Until now, the Saudis have opposed any cut in production, arguing that it is unnecessary to boost prices.
Analysts noted that even if some agreement is reached, the amount of oil likely to be withheld from world oil markets will probably not be enough to significantly affect prices. But some OPEC ministers believe that establishing the principle of cooperation between the weakened oil cartel and the expanding community of non-OPEC oil-producing nations is of greater long-term importance.