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Libya, Iran Urge Oil Cutback To Win Higher Prices

December 10, 1986

GENEVA (AP) _ Iran and Libya today called for a substantial cut in OPEC oil production as a way to push prices up to $18 a barrel.

Fawzi Shakshuki, the Libyan oil minister, told reporters it was ″obvious″ that the cartel could not force up prices without agreeing to cut back on supplies. He acknowledged, however, that it was not clear whether all 13 members would accept a lower output.

Ecuador’s oil minister, Javier Espinosa Teran, later told reporters he saw no need for production cuts.

Saying he believed some unidentified cartel members already were cheating on production quotas, Espinosa said, ″What is needed is the discipline to stick to″ the current quota agreement.

The officials spoke in brief encounters with reporters as the Organization of Petroleum Exporting Countries prepared for the start Thursday of its regular year-end conference.

Iran’s deputy oil minister, Hossein Kazampour Ardabili, later echoed Shakshuki’s comments and said $18 was only a ″first step″ toward pushing prices well above $20 a 42-gallon barrel next year.

The cartel is searching for an agreement on production quotas to replace an interim accord reached in October that expires Dec. 31. Its stated goal is to drive oil prices up to at least $18 a barrel, about $3-to-$4 above the current level.

Many of the key delegates stayed out of public view today, and those who were seen at the hotel conference site were generally reluctant to comment.

The conference marks the OPEC debut of Saudi Arabia’s new oil minister, Hisham Nazer. He took over in late October for Ahmed Zaki Yamani, who was fired by King Fahd after 24 years as OPEC’s leading figure.

Nazer declined to comment to reporters when he arrived in Geneva Tuesday, saying the world would ″find out soon″ whether the Saudis were prepared to sacrifice oil production as a means of pushing prices up from current levels.

Asked today whether he still was committed to an $18 price, Nazer said, ″Of course.″

Pressed to say whether Fahd would consider cutting production, Nazer said, ″I really have nothing to say.″ He gave a nodding confirmation that he had been meeting privately with other OPEC ministers, but repeated that he could not comment further.

Many OPEC ministers who in past years spoke openly with reporters about their deliberations have become tight-lipped in recent months. This reflects, in part, the confused state of affairs in OPEC and the sensitivity of oil negotiations in a weak market.

The Saudis hold a key to OPEC’s efforts to end the world oil slump, since they are by far the cartel’s largest producer.

Shakshuki said he would recommend to Thursday’s conference that OPEC reduce its production by at least one million barrels a day from current levels of about 17 million barrels daily.

He affirmed that Libya supported a Saudi call for an oil price of $18 a barrel.

″If we are to achieve that, it’s obvious we have to cut production,″ Shakshuki told reporters.

Asked how big a production he thought was needed, Shakshuki, said, ″At least to 16 million″ barrels a day.

Iran’s Ardabili cited the same figure.

Some economists believe that unless OPEC reaches an agreement to cut production at least slightly, prices will not go above $15 a barrel this winter.

An extended cold snap in the major consuming countries could send prices higher for a short time, but unusually large government and private inventories of oil products is expected to prevent any major price increase. Without an OPEC agreement, prices may plunge to $10 a barrel or lower, economists say.

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