OPEC Ministers Fail To Agree On Oil Export Cuts In First Meeting
VIENNA, Austria (AP) _ OPEC oil ministers failed in an initial round of talks Thursday to reach agreement on a proposal to cut oil exports in conjunction with non-OPEC producers, cartel leaders said.
After a nearly four-hour session that ended early Friday, the 13 ministers said they would resume their closed-door deliberations Friday evening.
Rilwanu Lukman, the Nigerian president of the Organization of Petroleum Exporting Countries, said the ministers had discussed the export-cutting plan ″in general terms, but nothing specific was decided.″
The proposed reductions, in combination with cuts by six non-OPEC oil exporting countries, are designed to push up oil prices and codify a new spirit of cooperation among oil producers.
The six independent producers on Wednesday said they would cut oil exports by 5 percent for two months if the Organization of Petroleum Exporting Countries did likewise.
OPEC, however, is divided over how to respond to the offer, which is the first such proposal from rival producers since the oil cartel was formed in 1960.
Oil prices on the open market fell Thursday. Brent crude from the North Sea dropped as low as $16.90 a barrel before closing at $17.20 in London, down 30 cents from Wednesday.
On the New York Mercantile Exchange, the June contract for West Texas Intermediate, the benchmark U.S. crude, fell 29 cents to close at $17.98 a barrel. The contract lost 33 cents on Wednesday.
Iran strongly supports the non-OPEC proposal, both as a way of strengthening the oil market and as a step toward closer ties with non-OPEC producers.
″Any measures and means that can lead to this would be supported by us,″ the Iranian oil minister, Gholamreza Aghazadeh, told reporters on his arrival from Tehran.
Other OPEC members, including Saudi Arabia, take a more cautious view. They want to encourage outside producers to restrain their oil output, but they see little merit in the terms of the proposal under consideration in Vienna.
Saudi King Fahd, meanwhile, reiterated his view that OPEC can get prices up simply by sticking to its existing agreement on production restraints. He did not comment directly on the non-OPEC offer.
″I believe prices will go up if we adhere to the output ceiling and convince non-OPEC producers of the feasibility of limiting their production,″ he was quoted as saying in an interview published Thursday by a Kuwaiti newspaper.
Officials from the non-OPEC countries were not attending Thursday’s cartel meeting, so there was to be no direct negotiating between the two groups.
The offer from the non-OPEC producers - Mexico, Egypt, China, Oman, Malaysia and Angola - states that they will cut their exports by 5 percent from the average level over the past six months. They said this amounted to about 200,000 barrels a day.
The cuts would be for May and June only.
A 5 percent cut by OPEC from its current level of exports would amount to about 700,000 barrels a day. Together with the 200,000 barrels to be cut by the outsider producers, this could have a significant impact on the market, analysts said.
But it appeared increasingly clear that OPEC would not cut by as much as proposed, sources in several delegations said, speaking on condition of anonymity.
The cartel easily could argue that a much smaller reduction would fulfill the terms of the outsiders’ proposal, which says only that a 5 percent cut by non-OPEC is conditioned on ″a similar proportional response by OPEC.″
If OPEC based its 5 percent cut on an average level of exports over the past six months - as the non-OPEC countries had done - then OPEC would have to cut only about 200,000 barrels a day from its actual present rate of exports. This is because OPEC’s exports were substantially higher in the latter part of 1987.
A cut of 200,000 barrels a day by both groups would have little or no impact on the balance between oil supply and demand, said Bahman Karbassioun, a Vienna-based oil consultant and a former OPEC staffer.
″It would have only a symbolic impact,″ he said.
The real aim of any OPEC cut in exports would be to solidify a relationship with the six non-OPEC countries involved in the proposed deal, he said.
″It’s to keep the interest of non-OPEC alive and to keep the door open for the future,″ he said.
Even so, Karbassioun and other analysts said any sort of agreement between OPEC and the rival producer group - even if it’s just a token - would give a psychological lift to the oil market.
″You could agree to almost anything at this point and the market would be pretty happy,″ said Paul McDonald, a London-based oil consultant. He said OPEC may face a tougher test this summer when oil prices may again threaten to decline.