O.P.E.C. freeze in peril as U.A.E. lifts oil price $2

Press, 18 October 1980, Page 9

O.P.E.C. freeze in peril as U.A.E. lifts oil price $2

NZPA-Reuter Bahrain A month-old price freeze by the Organisation of Petroleum Exporting Countries may be in danger following a price increase of $2 a barrel by the United Arab Emirates, Gulf oil analysts have said. The unexpected increase by the Emirates, an important producer, could begin price leapfrogging by other members of the 13-nation organisation, they believed. “This is not good news for consumers," one analyst said. A U.A.E. Oil Ministry spokesman in Abu Dhabi said that the increase was to bring prices into line with Saudi Arabia, the world’s largest exporter. It will lift U.A.E. prices to between 5U532.75 and 5U533.56 a barrel.

The U.A.E. produces, about 1.7 million barrels of oil a day, about 80 per cent from Abu Dhabi. Saudi Arabia agreed at a meeting of O.P.E.C. Oil Ministers in Vienna last month to raise its price by SUS2 a barrel to SUS3O. backdated to August 1. Other O.P.E.C. countries agreed to freeze their prices until the Ministers met again in December.

The analysts said that the U.A.E. increase appeared tc break the freeze agreement and could tempt other O.P.E.C. countries to do the same.

A halt to Iranian and Iraqi exports caused by the Gulf War has cut world oil supplies by almost four million barrels a day. Prices On the free spot market for oil have jumped by as much as 12 per cent since the war began. The price of Arabian light, for example, has gone up to around SUS 36 from SUS 32, a barrel. ' :

In London, oil-industry experts said it appeared that the U.A.E. was trying to take advantage of this surge in spot prices. However, world oil stocks remain around record levels of more than five billion barrels a day and part of the fall in supplies caused by the Gulf War will also be made up by increased production from Saudi Arabia and other Gulf producers. The U.A.E., for example, this week increased its exports to France by 50,000 barrels to 210.000 a day. The U.A.E. price rise brings the cost of a barrel of murban crude tc

;$U533.56 a barrel, thus restoring the traditional 8U53.56 quality differential over Saudi Arabian light crude, U.A.E. sources said. Some analysts said the timing of the U.A.E. move could indicate that Saudi Arabia, with which it has close ties, may raise its price to SUS 32 in a bid, to rescue O.P.E.C. pricing unity.

Until the Gulf War. O.P.E.C. had been inching towards a unified pricing structure espoused by the Saudi Oil Minister (Sheikh Ahmed Zaki Yamani). The analysts said that Saudi Arabia, which increased its output from the recent high level of 9.5 million barrels a day, could be seeking to re-establish its dominant position in O.P.E.C.

Gulf oil analysts have said that a real danger of a price explosion and shortages exist because of the cut in Iranian and Iraqi exports.

They believe that oilconsuming nations are being too complacent and should introduce emergency oil conservation measures to avoid a crisis if the export cut-off is long term and if the northern hemisphere has a severe winter.