Crude oil price jump expected

Press, 28 November 1988, Page 34

Crude oil price jump expected

By JENNIE KANTYKA NZPA-Reuter Tokyo Crude oil prices are expected to jump SUS2 a barrel in the short term if Iran agrees to a plan by O.P.E.C. Ministers meeting in Vienna on output and quotas for 1989, oil experts said. Britain’s key Brent Blend oil rose more than SUSI in Tokyo on Friday to SUS 14 as the 13 Ministers drew close to solving a dispute over Iranian and Iraqi output and clinching a production accord. The Middle East benchmark crude, from Dubai, was quoted at around SUSI2 up from SUSIO.7O in Europe on Thursday. O.P.E.C.’s 13 members have agreed on a proposal to peg oil output at 18.5 million barrels per day (bpd) in the first half of the year, a four million bpd cut from current levels, and maintain the SUSIB target price, the Iranian oil minister, Gholamreza Aqazadeh, said on Thursday. The proposed deal would give Iran and Iraq an equal 14.27 per cent share of the over-all production ceiling, but Mr Aqazadeh said he had to consult his Government before he could concede output parity to Iraq. “I think it is very possible that Iran is going to accept this idea,” said Masao Ito of Nippon Oil Company.

“If the current O.P.E.C. meeting is going to produce a fruitful result, I think prices in the international crude oil market will increase by two to three dollars,” he said. “It sounds almost like a done deal,” said a Japanese trader. "That is why the market is reacting so sharply.” Iraq has repeatedly demanded the right to produce the same amount of oil as Iran. Teheran’s refusal has led Bagdad to boycott the Organisation of Petroleum Exporting Countries’ production sharing accords since late 1986. “If Iran continues to refuse the same quota as Iraq, Iran is going to have to accept the continued decline in international crude oil prices,” said Mr Ito. “And if the current situation continues, Iran is going to suffer more than Iraq.” Iraq is currently pumping around 2.7 million bpd bqt its exports could more than double by 1990 with the completion of new export facilities, industry sources said. However, Iran’s maximum production capacity is very close to its current actual output of about 2.4 million bpd, they said. The quota parity issue is becoming overshadowed by Iran’s growing concern about maintaining its market share, increasing the likelihood that it will accept an equal quota.