OPEC faces up to weak oil prices, quota-busting
OPEC faces up to weak oil prices, quota-busting
VIENNA (Reuter): OPEC ministers entered a closed session of their Vienna conference yesterday, near consensus on a production freeze and vowing to confront the quota-busting often blamed for weak world oil prices.
The 99th ministerial conference of the Organization of the Petroleum Exporting Countries was set to agree to extend a current output ceiling into an unprecedented third year.
Weak prices below US$17 per barrel, compared with an OPEC goal of $21, left little option but to roll over the existing limit.
The 11 participating ministers were likely to reach consensus on a freeze for six months from Jan. 1, Oil Minister Rakad bin Salem bin Rakad of the United Arab Emirates said.
Then, however, OPEC had to address the acrimonious issue of alleged quota cheating by several countries, particularly Venezuela, Nigeria and Qatar.
OPEC president Amar Makhloufi of Algeria concedes that "It's a problem of collective discipline."
OPEC's own technical experts concurred that quota-busting excess was hurting prices. A report by their Economic Commission Board forecast an abnormal build of consumer stocks of 500,000 barrels per day if the excess is not curbed.
It amounts to about one million on top of the agreed ceiling on total OPEC volume of 24.52 million.
Talks opened without the minister of Gabon, which is threatening to follow Ecuador's 1992 example and leave OPEC. It says the annual fees of $1.8 million are poor value.
Small, poor Third World exporters chafe at OPEC quota rules, but Nigerian Oil Minister Dan Etete told reporters as he entered the closed session yesterday that a solution to the Gabon issue would be found.
"Gabon will stay," he said.
The likely freeze on current quotas, set in 1993, may defend oil prices but isn't likely to cause a wild rally.
Oystein Berensen, head of crude trading at Norway's Statoil, expected it would be "mildly positive".
London futures for the benchmark Brent Blend of North Sea crude oil began yesterday down nine cents at $16.62 per barrel.
Another reason for OPEC caution in setting 1996 output levels is the possibility, although regarded as remote, that the United Nations might ease its 1991 Gulf War embargo on the sale of oil by Iraq.
The Iraqi minister, Amir Muhammad Rasheed, scheduled a news conference for Thursday by when the OPEC conference is likely to be over. This is usual Iraqi practice.