Oil Drops Further as OPEC Ministers Wrangle
Oil prices slipped further Monday as OPEC ministers meeting here argued in vain about ways to prop up the market and make the world take them seriously.
Prices in New York and London continued a slide that began last week, though economists trying to interpret the oil situation were as deeply divided as the oil ministers themselves.
West Texas Intermediate, the benchmark domestic oil, fell 27 cents a barrel on the New York Mercantile Exchange to close at $16.43, after falling 75 cents last week. North Sea Brent, the widely traded international crude, was off 28 cents Monday at $15.52.
The midyear meeting of the Organization of Petroleum Exporting Countries, which began Saturday, was expected to end as early as today with an agreement to extend the much-maligned production ceiling set last December. That plan has failed to prevent a weakening of prices from $18 a barrel to the $14 to $17 range.
Cut Called Necessary
Most analysts have argued that a rollover of the current production ceiling of 15.1 million barrels a day for 12 of the 13 OPEC members would tend to bolster prices in the second half of the year, when the world normally buys most of its oil.
However, recent evidence of a slippage in demand, renewed OPEC overproduction and signs that major oil buyers, notably Japan, are building inventories have prompted some oil experts to say that OPEC must cut its production to avoid a fall in crude oil prices later this year.
Though prices for futures contracts have fallen nearly $1 a barrel in the past few days, OPEC analyst Bryan Jacoboski of Paine Webber said Monday that there could be another drop of 75 cents if OPEC merely extends the current agreement. And he sees no sustained recovery in prices later this year.
That appears to be a minority view, however, and little dramatic impact on consumer prices is expected from the current deadlocked OPEC deliberations. Most analysts continue to expect slightly rising prices for oil the rest of the year if OPEC stays on its present path.
Trying to Include Iraq
Analyst Fergus MacLeod of Barclays de Zoete Wedd in London blamed the price slippage on confusing reports from the Vienna meetings, including a walkout by one Arab minister and bitter arguments that have made it impossible for the cartel to break any new ground.
“I think it’s already bottomed out. I think we’re going to see an upward trend from here on,” said Joseph Story, a Washington consultant and longtime OPEC observer.
Cartel leaders spent Monday in small, informal meetings mostly aimed at finding a way to bring Iraq into the quota system. But Iraq’s minister, Issam Abdul Rahim, said Monday: “I don’t think this will happen, not the way it looks.”
The hopes of a majority led by Venezuela and Iran to cut the production ceiling have apparently been dashed by opposition from Saudi Arabia and Kuwait. The influential gulf producers would rather live with current oil prices than cut their own production to make up for alleged cheating by others.
