Glut costs O.P.E.C. billions—report

Press, 30 July 1986, Page 10

Glut costs O.P.E.C. billions —report

NZPA-Reuter London

O.P.E.C.’s drive to win back its share of the glutted world oil market has cost the 13-State group billions of dollars in losses, the authoritative “Petroleum Intelligence Weekly” magazine says.

"... it is clear that O.P.E.C. is winning its extra market share at an enormously high price,” it said. Members had suffered lost revenues of about 5U599.7 million a day in the first half of 1986 against the same period last year.

O.P.E.C.’s announcement in December that it would fight to regain its share of the market sparked a collapse in oil prices by more than 50 per cent to about SUS 9 a barrel today. The Organisation of the Petroleum Exporting Countries’ output has been widely estimated recently at nearly 20 million barrels a day, against a former ceiling of 16 million barrels set in 1984 and market demand now

of around 17 million. This week O.P.E.C. is meeting in Geneva to try to agree on member quotas for a 17.6 million barrels output ceiling for the rest of this year, aiming at driving prices back up to the SUSI 7-19 range.

The weekly said O.P.E.C. had wrested some 1.1 million barrels a day of demand from nonO.P.E.C. producers, but that each extra barrel gained had cost O.P.E.C. members as a whole some SUS3B billion in lower revenues in the first half of this year. “Petroleum Intelligence Weekly” said all O.P.E.C. nations were suffering revenue losses this year compared with 1985. But the distribution of those losses among members went far to explaining political tensions in the group. Saudi Arabia was earning 10 to 15 per cent more from oil exports than last (northern) summer, owing to increased output. Most other members

showed revenue declines of 50 per cent or more. Iran and Libya, which with Algeria, have argued for more dramatic output cuts to push prices to SUS2B a barrel, had had the biggest absolute falls in oil revenues.

“Petroleum Intelligence Weekly” said that the uneven losses among different O.P.E.C. members might make it hard for the group to reach an accord on quota allocations this week. “The distribution of financial pain among the oil exporters suggests there may be little incentive to compromise entrenched political positions as Ministers resume negotiations on a new quota accord,” the report said. A new Saudi surge in output to around 5.5 million barrels daily for July — 1.15 million barrels above the old quota — was adding to an already growing stock surplus and was undermining hopes of pushing prices up later this year, during the northern winter.