OPEC to Address Political, Overproduction Problems

OPEC faces the unpleasant task this week of tackling a combination of chronic problems: weak oil prices and political squabbling among its members.

Amid perceptions that a world glut of oil is building, OPEC has seen prices slide in recent weeks to more than $2 per barrel below the oil cartel’s target of $21 per barrel.

But members of the Organization of Petroleum Exporting Countries--excluding Iraq--are pumping too much oil, and many analysts doubt that OPEC has the will to impose quotas that will prop up the price.

Recent estimates show OPEC pumping about 25.3 million barrels of crude daily, well above its official limit of 24.2 million. A combination of plentiful oil supplies, sluggish demand during the recession and mild weather this autumn left the cartel’s average oil price at $18.69 per barrel last week.

The OPEC price is based on several types of crude and often runs between $1 and $2 less than premium crude prices quoted in the United States and Western Europe.

Any efforts to cut output at the meeting beginning Wednesday in Vienna could be hampered by political bickering among the 13 OPEC members.

Many experts see the coming meeting as a showdown between Saudi Arabia, OPEC’s dominant member and by far the largest producer, and No. 2 producer Iran, a traditional price hawk that has stirred concerns among Persian Gulf neighbors with its recent acquisition of a Russian submarine.

Iran’s possession of the Kilo-class submarine--and two more that are on order--could be troublesome should hostilities break out again in the gulf. When Iraq and Iran were trying to sink one another’s tankers in their drawn-out war of the 1980s, Iran used mines and ships that were not as threatening as the submarine.

Iran has also been involved in a heated dispute with the United Arab Emirates, another OPEC member, over Abu Musa, an island near the mouth of the strategic Strait of Hormuz. Iran and the UAE have claimed joint jurisdiction over the island, but Iran this year has been attempting to take complete control.

“There is definitely a new tension in the region and it is not Iraq this time. It is Iran,” said Thomas P. Blakeslee, an oil consultant with Brody, White & Co. in New York.