O.P.E.C. deal likely to hold oil price for a year

Press, 31 October 1981, Page 9

O.P.E.C. deal likely to hold oil price for a year

NZPA-Reuter Geneva Saudi Arabia has traded a SUS2 a barrel rise in its oil price in return for unprecedented tariff cuts by other exporting countries in an agreement which should stabilise the world market for at least a year.

O.P.E.C. (the Organisation of Petroleum Exporting Countries) Oil Ministers agreed at a one-day emer : gency meeting yesterday to unify prices on a SUS 34 a barrel base, with high-quality' African crudes ranged up to SUS3B. Previously the top price was SUS4O. Market experts calculate that the new deal will add about SUSI to the present average of around SUS 34 a barrel and add a few cents to petrol prices in some countries. It was O.P.E.C.’s third attempt this year to unify prices.

The Kuwaiti Oil Minister (Sheikh Ali Khalifa Sabah), who mediated between the O.P.E.C. Ministers, said yesterday the new agreement, which includes a freeze until the end of next year, would help stabilise the world oil market in years to come. O.P.E.C.’s pricing “hawks” caved in to sustained Saudi pressure to stabilise prices after a slump world demand allowed buyers to reject higher priced crudes.

A unified price gives all exporters a roughly equal chance in competing for sales.

O.P.E.C.’s previous unified pricing structure broke down when members scrambled to raise tariffs as high as a tight market in 1979 would bear.

When demand later fell, the Saudi Oil Minister

(Sheikh Ahmed Zaki Yamani) refused to significantly cut the kingdom's huge output of relatively cheap oil — now close to half O.P.E.C.’s total of about 20 million barrels a day — until prices were realigned on his terms. Sheikh Yamani said yesterday that the kingdom’s output would fall under the new pricing agreement,, but declined to give figures. Oil experts expect Saudi Arabia will let its output fall gradually, allowing the higher priced producers to increase their market share, but not so fast as to jeopardise the price freeze. While the base price is frozen, Ministers can review the differentials added or subtracted to take account of quality. This will be reviewed -when O.P.E.C. holds its next scheduled talks in Abu Dhabi on December 9.