Iran set the stage for a showdown in the Organization of Petroleum Exporting Countries Thursday, saying it would not allow archenemy Iraq’s request for an equal OPEC oil output quota.
“No, I don’t accept,” Iran’s oil minister Gholamreza Aghazadeh told reporters in Madrid, on his way to the three-day talks of OPEC’s price and long-term strategy committees. The summit aims to curb the cartel’s excess output, which has depressed world oil prices to 26-month lows in recent weeks.
Iraq, OPEC’s second-largest producer, pumps an estimated 2.7 million barrels a day and refuses any output quota other than the 2.369-million-barrel limit granted its Persian Gulf neighbor.
OPEC leaders Saudi Arabia and Kuwait have strongly urged Iran and Iraq to put aside their differences at the talks and help the cartel restore its quota system--and thus higher world oil prices. The cartel’s oil production exceeds demands by 2 million barrels a day, according to oil industry estimates. OPEC’s target price is $18 a barrel for internationally traded oil.
November contracts for West Texas Intermediate closed Thursday at $14.60, down 80 cents in nervous trading. North Sea Brent traded at $13.25, down 15 cents.
“Iran and Iraq are going to be forced in a closed room to expose and discuss their positions,” said Mike Unsworth, oil analyst at brokers Smith New Court in London. “They can’t sit there stonewalling for three days,” he added.
The Saudis have turned up the pressure for an Iran-Iraq quota cease-fire, as Saudi oil minister Hisham Nazer warned Iran earlier that Riyadh would block any quota deal unless Iraq were bought back into the cartel’s quota system.
Gulf producers formed a plan Sunday to reintegrate Iraq into the quota system and to use the resulting 17.429-million-barrel output ceiling as the starting point for 1989 quota negotiations.
If the Madrid talks resolve the Iran-Iraq conflict, detailed quota discussions would take place at OPEC’s full ministerial meeting, scheduled for Nov. 21 in Vienna.