O.P.E.C. plans oil output cuts to hold prices

Press, 24 October 1984, Page 10

O.P.E.C. plans oil output cuts to hold prices

NZPA-Reuter Geneva A group of leading O.P.E.C. oil producers meeting in Geneva would recommend that the 13-nation roup should cut production to defend prices, said a senior oil Minister yesterday. . The Kuwaiti Oil Minister, Sheikh Ali Khalifa al-Sabah, said that the recommendation would be put to a full O.P.E.C. meeting starting on Monday, by six O.P.E.C. members who were represented at the informal preparatory talks held yesterday. Sheikh Khalifa said that no final conclusions about the volume of the likely reduction had been reached, but he added, “We have narrowed down the figures.” He said that any agreement reached at next Monday’s meeting would take into account the expected winter demand in the northern hemisphere, which was likely to boost sales next month, and would fix the production figure to prevent a market price resurgence when the new demand came. The Organisation of Petroleum Exporting Countries now has a production ceiling of 17.5 million barrels a day. Prices are structured around a reference price of SUS 29 a barrel. Sources at the meeting said earlier that the Ministers, who included Saudi Arabia’s Sheikh Ahmed Zaki Yamani, were considering a cut of up to 3.5 million barrels a day or one-fifth of the present output.

The sources admitted that an agreement on such a large cut in output would be difficult because it would mean serious problems for the poorer- merhbers, including some Gulf States that have had their their incomes drastically reduced by the fall in world oil demand. The crisis conference was

called after one O.P.E.C. member, Nigeria, last week broke ranks with its 12 partners and reduced its prices ?USI to SUS2 a barrel after cuts by Norway and Britain for competing North Sea oils. Worried that leap-frog-ging after last week’s cuts could lead to a price collapse, Sheikhs Yamani and Khalifa, and Ministers from Libya, Venezuela, the United Arab Emirates and Algeria yesterday met two non-O.P.E.C. members, Mexico and Egypt. Delegation sources said that the Ministers had to start talking now to convince traders that they were doing something to shore up prices. Otherwise panic could grip the spot market and send prices to unacceptable levels this week.

The outgoing Libyan Oil Minister, Mr Kamel Hassan Maghour, who resigned last week, but who went to Geneva as a consultant to the Libyan delegation, said yesterday that the Ministers would try to get Nigeria to return to the formal O.P.E.C. price structure. The Nigerian Oil Minister, Professor Tam David-West, is due to face his O.P.E.C. colleagues today to explain his country’s controversial decision. The sources said that he was expected to argue that Lagos was simply being realistic in charging the market price. Sheikh Yamani and other Ministers said before arriving in Geneva that they were determined to maintain price levels. Many O.P.E.C. officials blame the present crisis on the high value of the United States dollar, in which oil is priced and traded. They recognise this has meant a huge rise in consumers’ bills but argue that customers should press the United States Government to bring down the dollar rather than expect oil producers to cut prices.