O.P.E.C. tries again to halt price-drop

Press, 10 March 1983, Page 8

O.P.E.C. tries again to halt price-drop

NZPA-Reuter London An O.P.E.C. bid to limit a decline in the world oil price—a result of the plunge in demand was still, undecided today.

Oil Ministers in a crisis meeting of the Organisation of Petroleum Exporting Countries hoped to set a new reference price of ?US3O or possibly JUS29 a barrel, against the current 5U534 conference sources said.

The conference, which was to resume at 10 pjn. (N.Z. time) yesterday, would then have to bolster this tactical retreat on the price by fixing production quotas for the 13 members. Failure to set a defendable price and production quotas could result in sellers’ continuing to offer competitive discounts, to clinch sales in the surplus-laden market, and might mean prices tumbling.

But. Dr Mana Oteiba, the United Arab Emirates’ Oil Minister, saw only a 50-50 prospect of agree- ment. Conference sources said that Nigeria wanted to continue pricing its product-rich

crude oil US5Oc below competing British North Sea grades. With the non-O.P.E.C. British on 5U530.50 that would argue a JUS3O Nigerian quote and a reference price for inferior Saudi Arabian light crude at $U529.50 or

SUS 29. The sources said that an O.P.E.C. majority was wary of going that low for fear of triggering a new price-cut by the British, who set their prices to try to move every last barrel they can pump, although Nigeria did not consider that a serious risk. Britain is now near 2.5 million barrels daily, making it the world's fifth biggest producer. Cash-pinched O.P.E.C. members have had to trim output to defend the O.P.E.C. price structure.

At the heart of O.P.E.C.’s inability to agree on an oil policy is the friction between the four conservative Gull members, led by Saudi Arabia, and a more radical group led by Iran.

Here is a look at the factions in the 13-nation Organisation of Petroleum Exporting Countries:

• The Gulf Arab nations, which produce about 40 per. cent of O.P.EC.’s oil, have far more oil in the ground—and more money in the bank—than most other members. As a result, they favour a moderate oil policy, which

they believe will allow them to sell oil far into the future. The four are Kuwait, Saudi Arabia, Qatar, and the United Arab Emirates.

• The more radical group is led by Iran, which is a bitter political foe of Saudi Arabia. Libya and Algeria generally side with Iran on price disputes, and Venezuela has supported Iran’s demand for a bigger share of O.P.E.C. oil sales. Most of these countries have big foreign debts, bigger populations, and smaller oil reserves. As a result they tend to support policies that would allow them to sell as much oil as possible now at the highest possible price. More than in the past, the O.P.E.C. cartel is being challenged by non-O.P.EC. oil producers. Britain and Mexico are the two biggest threats. The British Government, which controls North Sea oil output, has said that it favours a modest and limited drop in oil prices, while Mexico is concerned about the effects of lower oil revenues on its ability to repay its SUSBO-billion foreign debt.