O.P.E.C. urged to slash output as U.K. drops price

Press, 4 March 1982, Page 8

O.P.E.C. urged to slash output as U.K. drops price

NZPA London Britain is cutting North Sea oil prices SUS 4 a barrel, the second reduction forced on it within a month by the world oil glut,, according to oil-industry sources. O.P.E.C. (the Organisation of Petroleum Exporting Countries) would be tinder intesified pressure to slash its already depressed output, or else see world oil prices generally decline, after the surprisingly big cut in British prices and a cut last week by Mexico, market experts said.’ O.P.E.C.’s president, Dr Mana Said Oteiba, of the United Arab Emirates, is trying to set up an emergency O.P.E.C. meeting in the second half of this month. He flew to Riyadh yesterday to see the Saudi Oil Minister (Sheikh Ahmed Zaki Yamani), the key to any concerted O.P.E.C. move.

Oil Ministry sources in Caracas said yesterday that Venezuela was sending a message to O.P.E.C. saying it was ready to attend. After trimming its price by $1.50 on February 8, Britain offered oil companies another drop to a new price of $3l .a barrel, effective March' 1 and frozen to the

end of June. The biggest North Sea producer, British Petroleum, accepted the lower price and analysts expected others to follow it. The oil companies won the cut from a revenue-hungry Government after, complaining that they were losing money, buying high-priced crude and selling refined products such as petrol and heating oil in a sagging, recession-hit market.

Recession has helped push world oil demand down iy 10 per cent from peak 1979 levels arid the surplus of crude has created a buyers’ market.

Most O.P.E.C. contract prices including the benchmark SUS 34 for Saudi Arabian light crude, on which the organisation bases all its quotes, have held up so far, although industry sources say secret discourits are rife and Iran has made formal cuts totalling SUS 4. Libya, Algeria and Nigeria have been hit hard by buyer defections. Britain’s new quote is well below their prices of $U536.50 and SUS 37 for similar high-quality crudes.

Only Saudi Arabia, the biggest exporter, is wealthy enough to be able to take an

appreciable volume of crude off the market to ease the glut and defend prices. It is under strong OJ’.E.C. pressure to make a formal output cut. Saudi inaction so far has led some market analysts to speculate that it is willing to see prices fall in • any O.P.E.C. strategy to deal with the glut, hoping this will help the United States out of recession and thereby stimulate higher oil demand. Libya has called on Saudi Arabia to cut output from seven to only four million barrels daily, and the Libyan leader, Colonel” Muammar Gadaffi, accused the Saudis yesterday of flooding the market to hurt Libya and help the United States.

“To hell with Arab reaction and the U.S.A. Brothers, we shall not submit,” he said. Britain’s price-cut knocked ‘/LUSc off the value of the pound sterling yesterday. Sterling fell to trade on foreign exchanges at SUSI.BI4O after being under intermittent pressure for a week because of lower oil earnings.” - :; . ' j i “' - The. Government, with a Budget dub'.''shortly, “lose? about £25.0 million for every dollar cut from the price of a barrel of North Sea oil.