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OPEC Leaders Openly Divided on Eve of Conference

June 24, 1986

BRIONI, Yugoslavia (AP) _ Saudia Arabia, OPEC’s largest exporter, on Tuesday ruled out cutting its oil production, and the kingdom’s oil minister said he saw little chance of the cartel agreeing soon on moves to end the oil price slump.

Libya renewed its call for deep and immediate cuts in the Organization of Petroleum Exporting Countries’ production rate, setting the stage for a likely clash when OPEC opens its summer conference Wednesday on this island in the North Adriatic.

During a break in a series of informal talks with other key oil ministers, Saudi Arabia’s oil minister, Ahmed Zaki Yamani, told reporters, ″we are not prepared to lower our quota.″

Yamani also said that he did not expect the cartel’s meeting, its third session in four months, to produce a final agreement in setting an overall production ceiling and quotas for each of its 13 members.

″We are trying to achieve a good step here in Brioni, to be followed by other steps,″ Yamani said.

Libya’s oil minister, Fawzi Shakshuki, said as he arrived on Brioni that OPEC should drastically reduce production in order to push oil prices back to last fall’s level of $28 a barrel.

Shakshuki, joined by his counterparts from Iran and Algeria, have been holding out against a majority-backed plan for keeping production near current levels in hopes of coaxing prices up to a range of $18 to $20 a barrel.

Some Middle East crudes currently are being quoted at below $10 a barrel in the open market, and widely traded oils from the North Sea and the United States are hovering between $11 and $13 a barrel.

For instance, West Texas Intermediate crude, the most widely traded U.S. oil, fell 12 cents Tuesday to close at $12.88 a barrel in contracts for August delivery on the New York Mercantile Exchange. West Texas Intermediate traded as high as $31.70 a barrel in November.

While Libya, Iran and Algeria have been pressing for production cuts, Iraq’s oil minister, Qassem Taqi, said OPEC should establish a combined output ceiling of 17 million to 18 million barrels a day, compared with the 16 million limit it abandoned late last year. Such a production ceiling would raise Iraq’s quota, a move sure to be opposed by Iran, which has been at war with its OPEC colleague since 1980.

Such splits on production ruined OPEC’s two most recent meetings in March and April, and appeared to remain the main obstacle to a meaningful agreement in Brioni.

The oil minister of the United Arab Emirates, Mana Saeed Oteiba, said Monday that OPEC’s output had jumped above 18 million barrels daily. The authoritative Middle East Economic Survey reported that it had reached 19.1 million barrels a day this month.

This high rate of production has helped hold prices down - chopping some $60 billion in oil income that the 13 OPEC members had counted on for this year.

The Algerian oil minister, Belkacem Nabi, called the price slump an economic catastrophy for the cartel.

Speaking to reporters as he and his delegation arrived on Brioni, Nabi said the conference should aim at ″stopping the deterioration we have created″ in the international oil market.

″We’re searching for the political will of our partners to stop this catastrophy,″ he said.

Several of the minsters spent the afternoon strolling through the island’s thickets of cypress and pine trees or along the rocky, white beaches.

Brioni is the largest island in an archipelago of the same name that stretches off Yugoslavia’s Istrian peninsula. The late President Josip Broz Tito used Brioni as one of his private retreats, and today parts of it remain off limits to the public.

The OPEC ministers came here at the invitation of the Yugoslav government.

Despite the change of scenery from their usual meetings in Geneva or Vienna, Austria, the cartel leaders gave few indications that they had any new ideas for reversing the oil market depression.

The official Saudi news agency said Tuesday that King Fahd had issued a statement urging the OPEC leaders to persuade non-OPEC oil producers to help stabilize oil prices.

″We hope that producers outside OPEC will understand that their long-term interests rest with their cooperation (with OPEC) in upholding this balanced policy,″ the king was quoted as saying. He proposed no new solutions to the cartel’s internal stalemate.

Norway’s new government said last week it would be willing to cooperate with OPEC under certain circumstances, but non-OPEC producers have yet to agree to cut production.

No representative from a producing nation outside OPEC was expected at the Brioni meeting.

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