OPEC Reaches Accord on Production Ceiling : Energy: At 22 million barrels daily, the cartel targets a minimum price of $18. But the United Arab Emirates said it wouldn’t hold to its quota.

OPEC managed Tuesday to agree to an oil production ceiling for the first half of 1990, but the specter of cheating on the quotas arose immediately as the United Arab Emirates announced that it would do as it pleased.

The 13 members of the Organization of Petroleum Exporting Countries announced after six days of talks that a production limit of 22 million barrels of crude a day would be imposed starting Jan. 1. That would remove at least 750,000 barrels from the market and keep the group’s average oil price at about $18 a barrel.

OPEC has called this its “target price,” but that title was changed Tuesday to “minimum reference price.” The markets view it differently, however, with the average price for OPEC oil now about $17.75 a barrel.

The new agreement parcels out specific shares for each member in hopes of keeping overall output by OPEC members at 22 million barrels a day to prevent a flooded market. The world burns more than 50 million barrels each day.

Even though he signed the formal accord, the UAE’s oil minister, Mana Said Oteiba, told reporters as he left the conference that he had no intention of observing the OPEC quota for his country of about 1.1 million barrels a day.

“We will limit our production to 2 million barrels a day,” Oteiba said. “We are now producing 2.6 million barrels a day. If any member country goes above (its quota) we will produce more.”

With that, he turned on his heels and strode out of OPEC’s headquarters to a waiting limousine.

A senior OPEC minister branded him privately as “an outcast” and said he was skeptical that the UAE could produce that much oil. “That 2.6 million figure is ridiculous,” said the minister, who did not want to be quoted by name.

Oil markets in the United States looked on the UAE’s flouting of its quota as bearish, and the benchmark crude West Texas Intermediate dropped 38 cents a barrel to $19.25 on the New York Mercantile Exchange.

However, some analysts said the new agreement could slow an expected decline in prices in the first half of the year, when oil demand usually weakens.

And Hisham Nazer, the influential oil minister of Saudi Arabia, told reporters that prices “will steadily go up after the market ascertains the durability of the agreement.

Oil industry sources said the UAE does not want to accept a binding single quota because each of the seven emirates that make up the UAE has sovereignty over its own oil and mineral resources.

OPEC did manage to persuade another big Persian Gulf producer, Kuwait, to return to the fold. Kuwait had also flouted the rules, but has how agreed to cut production to 1.5 million barrels a day.

Libya was unhappy that it got too little out of the agreement. “Libya will continue to have reservations on the quota because it did not satisfy us,” its oil minister, Fawzi Shakshouki, said of its daily share of 1.233 million barrels. It now produces 1.15 million, but wanted a higher number.

Ecuador said it would produce 7,000 to 17,000 barrels a day above its new quota of 273,000 barrels because of hard economic times.

Saudi Arabia’s Nazer said the pact would cut a total 1.2 million to 1.3 million barrels a day. But analysts said the cut would be more like 750,000 barrels if everyone plays by the rules.

Fergus MacLeod, an oil analyst with the London investment firm Barclays de Zoete Wedd Ltd. said the agreement “looks better than most people thought was possible.”

Peter Nicol, an analyst at Warburg Securities in London, said: “They haven’t cut production as much as the market would like to see. It’s probably not enough.”

OPEC president Rilwanu Lukman, Nigeria’s oil minister, told a news conference that OPEC would meet again if prices do not reach the $18-a-barrel minimum. The ministers are scheduled to meet in March in Casablanca to review the situation.

OPEC’S NEW QUOTAS

Table compares quotas for each of OPEC’s 13 members for the first half of 1990 to quotas for the current quarter and gives the percent change. Quota figures are in barrels per day.

1st half Current Percent Country 1990 quarter change Saudi Arabia 5.38 5.014 +7.30 Iran 3.14 2.925 +7.35 Iraq 3.14 2.925 +7.35 Venezuela 1.945 1.812 +7.34 Nigeria 1.611 1.501 +7.33 Kuwait 1.50 NA NA Indonesia 1.374 1.441 -5.04 Libya 1.233 1.15 +7.22 United Arab Emirates* 1.095 1.095 Unch. Algeria 0.827 0.771 +7.26 Qatar 0.371 0.347 +6.92 Ecuador 0.273 0.254 +7.48 Gabon 0.197 0.185 +6.49

NA: Not applicable. Kuwait has ignored previous quotas; the 1.5-million level represents a cut.

* The U.A.E. said it will ignore the accord.

Source: Associated Press