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Ministers Expect To Reaffirm Current Oil Price

June 24, 1987

VIENNA, Austria (AP) _ OPEC oil ministers, preparing Wednesday for their first meeting of the year, appeared to rule out trying to push up prices this summer.

Cartel leaders and private analysts said the most likely outcome of the conference, which opens Thursday, would be an agreement to stick to OPEC’s current average price of $18 a 42-gallon barrel.

Such a deal would be expected to keep world oil markets relatively stable, at least through the summer, despite OPEC’s inability to keep some members, such as Iraq, from pumping too much oil.

Oil prices on the open market currently range from about $18 for most OPEC crudes to $20 for top-quality oils in the United States and the North Sea.

An air of extraordinary optimism prevailed among the oil ministers of the Organization of Petroleum Exporting Countries as they gathered in Vienna to lay the groundwork for their regular summer conference.

Mana Saeed Oteiba, leader of the United Arab Emirates delegation, and his Kuwaiti counterpart, Ali Khalifa al-Sabah, said on their arrival that they favored sticking to the $18 current price.

″We have the December agreement, and we have to stick to it,″ said Oteiba.

He was referring to the cartel’s breakthrough agreement of last Dec. 20, which reinstated a fixed price for each member’s oil and set an overall production limit of 15.8 million barrels a day through June 30.

That ended a year of drastic declines in oil prices - to below $10 dollars a barrel last July - and marked the start of a new political solidarity among key members such as Saudi Arabia and Iran.

The December agreement set firm prices and production limits only for the first six months of 1987. But it included an additional agreement in principle to raise the production ceiling on July 1 and again in September.

The provisional summer limit would be 16.6 million barrels a day, and starting Sept. 1 it would jump to 18.3 million.

Most OPEC members appear to favor using this week’s meeting to formally ratify those changes while keeping the price steady at $18 a barrel.

A committee of oil ministers representing Libya, Algeria, Iran, Iraq, Ecuador and the United Arab Emirates met for about one hour at OPEC headquarters to study an experts’ report on the global oil supply and demand outlook.

Afterward the ministers refused to say whether they had agreed on any recommendations for Thursday’s full conference.

″We never talk to the press before meetings,″ Oteiba said with a laugh. ″I can’t tell you anything.″

Iran, which traditionally pushes hard for price increases, had indicated earlier this week that it would favor delaying the production increases in order to drive the price to at least $20.

In a sign that the hardliners may soften their stance, Fawzi Shakshuki, the oil minister of Libya and a close ally of Iran, said in Vienna that his country could agree to keeping the December formula.

Indonesian Oil Minister Subroto told reporters on his arrival that he foresaw no major changes in OPEC’s strategy.

″You can expect no world-shaking developments,″ Subroto said, adding that OPEC’s experts were still studying prospects for an increase in world oil demand over the next several months.

Paul Gregory, an oil analyst at the investment firm of Wood, Mackenzie and Co., in Edinburgh, Scotland, said he saw little chance of a major clash in Vienna over Iran’s preference for a higher price.

″Saudi Arabia and other moderates seem to have won the battle already to keep the price at $18,″ he said in a telephone interview.

Other analysts said they thought the OPEC meeting could become embroiled in political disputes such as the war between cartel members Iran and Iraq.

Iran reported Wednesday that its fighter jets had shot down an Iraqi helicopter after the chopper damaged a tanker in the northern part of the Gulf. Salvage experts in the Gulf area said the damaged tanker was Turkish and was struck about 10 miles off the Iranian port of Bushehr.

″The Iran-Iraq conflict is very much to the fore,″ said Mary Buglass, an analyst at the London office of Shearson Lehman Brothers, an investment firm.

At most previous OPEC meetings the two war rivals have managed to prevent their conflict from paralyzing the oil talks.

Other possible stumbling blocks for OPEC include the United Arab Emirates’ unhappiness with its current oil production quota, which it considers to be too low.

Oteiba said, however, that if no one else requested a change in the terms of the current agreement, he would forego his request for a higher share.

″If the agreement will continue without touching it, then we will go along,″ he told reporters.

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