Almost Half Of OPEC’s Members Agree To Voluntary Production Cuts
GENEVA (AP) _ At least seven OPEC members pledged to make voluntary oil production cuts as a first step to force up prices, but no agreement was reached on binding reductions, the cartel’s president said today.
The Organization of Petroleum Exporting Countries has been struggling for months over disputed production quotas for each member. Binding quotas are considered the only way of reducing output to reverse this year’s drastic fall in oil prices, which have dropped by $8 a barrel on some markets.
OPEC President Rilwanu Lukman said seven or eight countries among the 13 cartel members had agreed to the voluntary cuts, totaling 1.6 million barrels a day, while the others had not yet stated their position.
Speaking at a news conference, Lukman refused to say whether the countries that made the pledge on voluntary cuts would go ahead with the plan if the other members refused to join them.
The ministers adjourned their conference after a 90-minute session and agreed to meet Thursday.
Lukman refused to name the countries which have agreed to cut production but OPEC sources said Saudi Arabia, the cartel’s main producer, was one of them.
Iraqi Oil Minister Qasim Hassan Taqi later told reporters it would be unfair for OPEC to ask Iraq to reduce its oil output and said his nation would refuse to do so.
Production agreements are considered especially difficult because OPEC members Iran and Iraq have been at war since September 1980, and each reject any proposals they believe favor the other.
With no agreement yet on binding cuts, members decided voluntary reductions totaling 2 million barrels would be the first step toward raising prices, Lukman said.
Lukman, who is the Nigerian oil minister, said OPEC was hoping that voluntary cuts in production will be ″beneficial for the market and oil prices.″
The OPEC ministers gathered in Geneva to try and agree on an overall production quota of 17.6 million barrels a day. The proposed overall ceiling was accepted by a majority of ministers in June.
OPEC’s officially decreed but ignored daily production ceiling is 16 million barrels a day, with output estimated at about 20 million barrels. Industry experts estimate that current production is about 2.5 million barrels over the world’s daily demand for OPEC oil.
Algeria, Iran, Libya and Gabon want a lower ceiling which they hope will boost prices faster.
″If we get 2 million barrels a day, it would be a good start,″ Lukman said. ″As soon as we are able to reach an agreement on quotas, the voluntary cuts will be replaced by quotas.″
Lukman said Indonesian Oil Minister Subroto was continuing contacts with countries that had still not pledged voluntary cuts.
Saudi Arabia’s Oil Minister Ahmed Zaki Yamani said earlier his country was willing to cut production, but he did not say by how much. Kuwait, Libya, Ecuador and Iran also said they were ready to make voluntary cuts.
Several members have accused Saudi Arabia and its allies in the Persian Gulf of increasing production in order to deflate prices and force non-OPEC members to join in a global production-sharing agreement.
Non-OPEC members like Mexico, heavily dependent on export earnings from oil, have been hurt badly by the drop in oil prices caused by the production glut. A 42-gallon barrel of oil that went for $32 in December is now trading for as little as $8 on some markets.
Lukman said major non-OPEC oil producers, such as Mexico, had expressed willingness to go along with OPEC’s decision to reduce production voluntarily. ″We believe they are willing to cooperate and they’re ready for action,″ he said.
Oil-futures prices surged in reaction to the prospect of an OPEC production cut. On the New York Mercantile Exchange, the price of West Texas Intermediate, an important market barometer, jumped 70 cents a barrel Tuesday to $11.77.
But later in the day, prices pulled back slightly, and West Texas Intermediate closed at $11.41 a barrel.