OPEC Ministers Arrive for Key Meeting on Slashing Production
GENEVA (AP) _ On the eve of their first meeting since the Gulf War, OPEC ministers Sunday appeared willing to slash oil production but were at odds over how deep to make the cuts.
Saudi Arabia’s influential oil minister, Hisham Nazer, played down the importance of Monday’s session, saying it was called merely to review the oil market.
Fresh from the allies’ victory in the Gulf War, the kingdom will play a pivotal role in fashioning oil policy for the coming months. Shortly after the Iraqi invasion of fellow OPEC member Kuwait, Saudi Arabia widened its oil taps to make up for the oil lost to the embargo of the two countries.
Saudi Arabia’s willingness to trim production - and by how much - will help determine the price of oil in the months ahead.
Other ministers signaled an interest in moving to reduce output in April, May and June. In doing so, they hope to lift prices to the cartel’s $21 a barrel target. Prices have slumped almost $5 below that benchmark.
″OPEC will take all the necessary steps to stabilize the market,″ said Indonesian Oil Minister Ginandjar Kartasasmita. ″If a cut (in output) is necessary, then we will do it.″
Nazer said little as he entered the tightly-secured Intercontinental Hotel.
Nazer, asked about measures the cartel might take, replied, ″We’re just coming to a monitoring committee meeting. That’s all.″
He said he doubted the talks would be turned into a formal conference, the forum needed for decision-making.
A gulf source, demanding anonymity, indicated Saudi Arabia did not want to cap production too much, suggesting an overall ceiling of ″perhaps 22″ million barrels a day would be acceptable. That would amount to a cut in current supply of about 1 to 1.5 million barrels a day.
Other ministers, though, have suggested a cap of 21 million barrels a day might be preferable in the spring months when demand falls with warmer weather in the United States and other oil-consuming nations.
The gulf source said, ″If they (other producers) are not willing to be cooperative, then there won’t be an agreement.″
The Middle East Economic Survey, a respected newsletter based in Nicosia, Cyprus said in its issue to be published Monday that Saudi Arabia would take a ″firm line″ against any attempt to force sharp supply cuts.
The newsletter quoted an unidentified Saudi oil official as saying the situation in the gulf remains dangerous because there is not a definitive ceasefire agreement.
There was no word yet on who - if anyone - would represent defeated Iraq at the talks.
″I hope we will have a snappy meeting to address the problem of clearly surplus oil on the market,″ said Nigeria’s oil minister, Jibril Aminu.
Aminu suggested a new production cap on OPEC output might be about 21 million barrels a day for the April-June quarter.
OPEC’s current production is estimated at 23 million to 23.5 million barrels a day for members other than Iraq and Kuwait.
The cartel, which draws together 13 diverse nations, was sharply split by the gulf crisis.
Shortly after Iraq’s invasion, OPEC scrapped its production quotas so countries with spare capacity could pump to their utmost and make up for the shortfall of 4 million barrels a day of Iraqi and Kuwaiti crude.
At a meeting in December, they pledged to reimpose their production limits once the crisis eased.
Their last output accord set an overall ceiling of 22.5 million barrels a day. But that may be too much oil for the April-June quarter.
OPEC economists have projected demand for the group’s oil at about 21.5 million barrels a day in the spring period.
Crude prices have been sluggish.
The average price of a basket of seven crudes monitored by OPEC slid to $16.39 a barrel at the end of last month - not even close to the $21 target. It shot up to more than $37 in October.
If they agree on reducing output, the ministers then will have to decide who cuts how much.
The ministers could put their July output accord back in place. But that includes production quotas for Iraq and Kuwait, neither of which is expected to produce much, if any, oil in the spring quarter.
Without the two, the quotas add up to 17.9 million barrels a day, leaving a gap of 3.2 million to 3.6 million barrels to meet expected demand.
The July accord contained a clause allowing countries with extra capacity to produce part of the unused quota of another member.
Saudi Arabia, the world’s largest crude exporter, increased production from its July quota by a whopping 56 percent, moving from 5.4 million barrels a day to its current level of some 8.4 million barrels.
OPEC members are: Algeria, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Qatar, Nigeria, Saudi Arabia, the United Arab Emirates and Venezuela.