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Producers Expect Weaker Prices in Second Quarter

March 26, 1990

MUSCAT, Oman (AP) _ The price of crude oil should fall in the April-June quarter before rising in the last half of the year, the world’s leading oil producers believe.

OPEC Secretary-General Subroto said Sunday the 13 Organization of Petroleum Exporting Countries and more than a dozen independent oil producers differed on how steep the price fall would be but agreed it would not be sharp.

″In the short term we foresee some weakness in the second quarter. But in the third and fourth quarter the market will strengthen,″ Subroto said. ″Everybody seems to agree there will not be a dramatic change in price.″

Subroto made the comments to reporters during a conference of experts from OPEC and independent producers including the Soviet Union and Norway, the U.S. oil-producing states of Alaska and Texas, and the Canadian province of Alberta.

Over the longer term, Subroto said delegates expected world crude oil demand to grow about 3.2 percent to 3.3 percent per year. But he said there also were differences of opinion on that subject.

The experts met over the weekend following an OPEC ministerial meeting in Vienna last week. The cartel voted to maintain a production ceiling of 22 million barrels per day for the April-June quarter.

Oil prices have fallen since the OPEC meeting because of lack of firm guarantees by member states not to overshoot individual production quotas and because of the end of high winter demand.

OPEC is believed to be producing about 1 million barrels a day more of crude oil than the market can absorb. OPEC ministers are to meet meet May 25 to consider production and pricing policy for the cartel for the second half of 1990.

Delegates to the Muscat conference said no decisions were made on production or pricing policies.

Oman, which is not an OPEC member, has played a major role in generating support of other independents to restrict oil output and help OPEC’s targeted prices.

Omani Minister of Petroleum and Minerals Saeed Ahmed Shanfari said ″common understanding″ was still needed between the two blocs on short-, medium- and long-term policies even though world oil demand was rising.

″We’ve proved that the independent oil producers and exporters are serious in their efforts and are ready to shoulder part of the responsibility with OPEC to achieve stability of the market and its prices,″ he said Saturday.

OPEC, faced with a collapsing oil market in 1986, pressed for the support of major producers outside the cartel to coordinate output to stabilize prices around $18 a barrel. But rising world demand helped strengthen prices beyond $18.

A 1988 conference similar to the one in Muscat produced an agreement for a self-imposed 5 percent production cutback to bolster OPEC efforts.

The market has steadily improved with an unexpected rise in demand induced by dwindling production levels in the United States and the Soviet Union, as well as other majors. Tapping into possible high demand from Eastern Europe also is being considered.

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