OPEC Grappling With Issue of Whether to Cut Back on Oil Production

Gone from previous years are the fancy headdresses and the flowing robes. The oil ministers who convened here Monday, representing 12 members of the Organization of Petroleum Exporting Countries, favored conservative, Western business suits.

But their common apparel masked deep divisions over how much oil the world’s most famous cartel should pump. Although more meetings are scheduled today, the divisions threatened to block even a modest reduction in oil production.

U.S. oil markets, betting on disarray within OPEC, drove down the price of benchmark West Texas Intermediate crude for April delivery to $18.99 a barrel, down 32 cents. And no one said anything in Geneva that might suggest the markets were wrong.

“The atmosphere is not very easy,” said Iranian Oil Minister Gholamreza Aghazadeh as the day began.

As it ended, OPEC Secretary General Subroto of Indonesia said the national oil ministers had spent most of the day listening to assessments of the world oil supply-and-demand situation. Not until today, he said, will the ministers try to zero in on whether to limit production.

Pressing for a production limit are Algeria, Gabon, Indonesia, Libya, Nigeria and Venezuela. Their representatives met informally last month in Vienna and agreed that OPEC production--unshackled in August after Iraq invaded Kuwait and most of the rest of the world launched a boycott of those countries’ petroleum--should be cut to 21 million barrels a day from 23 million.

That should be enough, they said, to drive the price of OPEC oil from its present level--between $17 and $18 a barrel--to the $21 target that OPEC had set last July.

Foremost among the opponents of such a limit is Saudi Arabia, which pumped as much oil last month--8.3 million barrels a day--as the six other countries combined.

The Saudis spent $50 billion on the Persian Gulf War, a staggering total even for the world’s most oil-rich nation. “For the first time in its recent history, Saudi Arabia had to resort to borrowing on the world’s financial markets,” noted an OPEC official who asked not to be identified.

Uncomfortable in that role, the Saudis are seeking as much short-term oil revenue as they can make. That means continuing to produce at current levels, even though they exceed the quota adopted by OPEC last July by nearly 3 million barrels a day.

The Saudis have the muscle in the market to get what they want. In 1986, for example, their policy of pumping to capacity drove the price of OPEC oil down by nearly two-thirds to $10 a barrel.

This year, Saudi Arabia has an ally--although for now it is a paper tiger. Kuwaiti officials have said they want to reward the United States, which led the forces that drove out the Iraqi invaders, with lower oil prices.

There is not much Kuwait can do now toward that end, because Iraq destroyed nearly all of its oil production facilities.

OPEC’s current divisions are only the latest in a history of altercations that escalated shortly after the cartel cut production and drove prices up about threefold in 1979.

“This organization spans the globe from Ecuador to Indonesia,” said the anonymous OPEC official. “What is amazing is that it has survived at all.”

OPEC’s differences are not just geographic. The nations at its core--the Gulf oil producers--are not exactly models of friendship and cooperation.

Iraq, the only one of the 13 OPEC countries that did not send a representative to Geneva, invaded fellow cartel member Kuwait and threatened Saudi Arabia. The Price of Crude This is a listing of the average price of seven types of crude oil monitored by OPEC, in dollars per barrel 1990 Jan.: 19.98 Feb.: 19.03 Mar.: 17.67 Apr.: 15.63 May: 15.47 June: 14.02 July: 15.68 Aug.: 24.86 Sept.: 32.09 Oct.: 34.32 Nov.: 30.74 Dec.: 26.15 1991 Jan.: 22.32 Feb.: 17.55 Source: OPEC