OPEC ceasefire benefits?

Press, 21 July 1988, Page 24

OPEC ceasefire benefits?

By

JENNIE KANTYKA

NZPA-Reuter Tokyo

A ceasefire in the IranIraq war would allow OPEC to renew efforts to control output and to drive prices up to the oil cartel’s SUSIB a barrel target, Far East oil experts said early yesterday N.Z. time.

Crude-oil prices jumped more than SUSI after Iran accepted a United Nations ceasefire resolution that could herald the end of the eight-year war, they said.

“Prices could be increased one or two dollars more by August 3 on expectations of OPEC cooperation,” said Yasuhiko Tashiro, a chief economist for the Idemitsu Kosan oil company. The Mideast benchmark crude, from Dubai, surged to around $U513.65

up from 5U512.55 at Monday’s Tokyo close, but still nearly SUS 4 below its $U517.42 official OPEC price target. “The fundamental factors have not changed,” said Mr Tashiro. “The supply-demand balance is very bad still and unless OPEC takes concrete action such as reducing production the price will move down again.” An official of the Organisation of Petroleum Exporting Countries said on Monday a possible meeting of its price monitoring committee was being discussed, but no date had been fixed. Tokyo traders said they expected a meeting to be held on August 3.

“If OPEC announces an exact date of a meeting, that will fuel the bullish feeling again — people will expect some con-

structive agreement,” a Japanese refiner said. Oil analysts said the Arab Gulf States have been driving oil prices down to squeeze Iran's revenues and disrupt its war effort, and that this policy might now change. “As far as there will be no tension in the Gulf, there will be no immediate intention to dampen the market,” said the refiner. “The Gulf countries are more likely to pay attention to purely economic interests. Therefore there’s a possibility the next OPEC meeting can come up with an agreement.”

However, the analysts said there were still many hindrances to a unified OPEC agreement that could boost prices up to SUSIB a barrel. Iran has consistently rejected allowing Iraq an

OPEC production quota equal to its own. Mr Tashiro said that if this issue was resolved other OPEC problems, which have prevented the cartel reaching constructive agreements at its last several conferences, could be tackled.

Venezuelan Energy Minister, Arturo Hernandez Grisanti, said on Monday that the Gulf War had obliged some oil Ministers to mediate between Iraq and Iran at OPEC conferences when tension between them ran high. Ministers had been forced to shuttle between the two countries’ suites to seek a consensus on oil matters.

A ceasefire could help lower internal tensions within OPEC and increase its capacity to take the decisions that the market requires, he said.