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OPEC Panel Reports Progress On Pricing

January 21, 1985

RIYADH, Saudi Arabia (AP) _ An OPEC committee reported progress today in efforts to resolve the divisive issue of realigning the cartel’s pricing system, but refused to provide details pending further meetings next week.

Nigeria’s oil minister, Tam David-West, said the committee considered a Kuwaiti plan to replace OPEC’s price system, currently pegged to a $29-a- barrel-price for Arabian Light oil, with an average price for all of the organization’s various grades of oil. But David-West said other proposals also were considered, although he refused to elaborate.

Fadel Al-Chalabi, the deputy secretary general of OPEC, called the session at the Riyadh Intercontinental Hotel ″satisfactory,″ but he, too, declined to provide details.

The panel, known as the technical committee on price differentials, concluded two days of talks that conference sources described as ″difficult but amicable″ negotiations. It is scheduled to meet again on Sunday in Geneva, Switzerland, one day before all 13 oil ministers of the Organization of Petroleum Exporting Countries hold a special meeting.

The committee is chaired by Shiek Ahmed Zaki Yamani, the oil minister of Saudi Arabia, and includes representatives of Nigeria, Qatar, Kuwait, Algeria, the United Arab Emirates and Libya. Libya’s representative failed to show up at the session at Riyadh.

With more oil available on world markets than is needed, OPEC has been struggling to defend its official prices since last summer. In addition, some members of the cartel have been under pressure to cut prices in an attempt to keep customers because of a shift in preference away from expensive light oils to less expensive and lower quality heavy oils.

With a coal strike in Britain keeping up demand for heavy residual fuels for factories and with many refiners remodeling plants to process heavier crude oils, customers are no longer willing to pay official prices for light oils.

As a result, heavy oils are selling at a premium over official OPEC prices on spot or non-contract markets while light oils are selling at a discount.

In December, OPEC took a first step toward addressing the problem, agreeing to keep Arabian Light unchanged at $29 a barrel but to increase the prices of its heavy grades by 50 cents, to raise its medium grades by 25 cents and to lower its extra light oils by 25 cents. Algeria and Nigeria, two producers of light grades of oil, refused to go along, however.

And wide price differences still remain.

On the spot market today, Arabian Light was quoted at $27.90 a barrel, or $1.10 below its official price, according to Telerate Energy Service, a private market information firm. Arabian Heavy, meanwhile, was quoted at $26.70, or 20 cents above its new official price.

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