OPEC hits deadlock on output quotas

Press, 26 September 1989, Page 23

OPEC hits deadlock on output quotas

NZPA-Reuter Geneva The Organisation of Petroleum Exporting Countries hit a deadlock at talks called to try to stop some members flouting their oil output quotas. Enough excess OPEC crude oil has reached the market recently to brake this year’s rebound in world petroleum prices. A tense two-hour session of the 13 oil Ministers on Sunday night brought them no nearer to a solution to the problem of quota-busting, led by two Arab Gulf producers — Kuwait and the United Arab Emirates, delegates said. “There is no point in false solutions,” a Minister said, lending support to lobby speculation that OPEC might fail to agree at this meeting and decide to try again at further talks scheduled for Vienna on November 25.

The basic problem was that demands for much bigger output quotas by Kuwait and the UAE cannot be accommodated within a feasible ceiling on total OPEC supply unlesss others surrender market share to them.

Saudi Arabia, Iran and Iraq were among those still unwilling to do that and insisting that any quota increases be made on a strict pro rata basis, delegation sources said.

Kuwait and the UAE have meanwhile simply opted out of the quota system and are producing as they please. The current ceiling is set at 19.5 million barrels per day (bpd). Quota breaches have taken actual OPEC volume up toward 22M bpd, according to Western oil companies. OPEC has only been rescued from a price crash by surprisingly strong demand in the United States, West Germany and Asia. But prices remain about a dollar below its target of an average SUSIB (SNZ3O) a barrel. That infuriates the OPEC majority, Kuwait and the UAE are the only members not under at least some financial pressure. On Sunday’s second day of the Geneva talks, delegates said, Saudi Arabia, Iraq and Iran were among those which probably supported an OPEC secretariat proposal to take the ceiling up to 21.5 M bpd. Iraq suggested 22M bpd. All emphasised that a higher ceiling was conditional on strict adherence to assigned quotas by all 13 producers. The Saudis said they would not allow others to- fill any extra demand for OPEC oil alone.

Iran, which has less capacity to flood the market than Saudi Arabia, made a similar threat, the sources said.