OPEC Reportedly Calls for Emergency Session

Amid continuing uncertainty in world oil markets, oil ministers of the Organization of Petroleum Exporting Countries on Wednesday reportedly scheduled an emergency meeting in Geneva for Jan. 28 to discuss production controls and prices.

Officials at the Vienna headquarters of OPEC would not confirm that a meeting was set, but said the cartel’s 13 ministers were being consulted about the possibility of holding a meeting at the end of January.

When OPEC recessed its year-end meeting last month, it said it would soon resume deliberations aimed at averting a collapse in oil prices.

Word of the meeting came as the smaller independent North Sea oil producing companies that sell 51% of their output to the government-owned British National Oil Corp. said they were increasingly anxious at the delay in setting an official price this quarter.

Sold Available Oil Oil traders said BNOC has already sold virtually all the oil available to it for January and February loading on the spot market because contract customers are no longer prepared to pay the official price of $28.65 a barrel.

BNOC said Tuesday that it was still considering the official price at which suppliers will be paid for their oil and denied published reports that it had abandoned its official price system, a move OPEC members have warned could lead to a price war.

In a statement Tuesday, British National said it was continuing the official system for determining the prices it pays for North Sea crude oil. But it repeated earlier statements that it has been selling the oil it buys at spot market, or non-contract, levels.

Prices in the spot market are substantially below the last official contract selling price, the $28.65 a barrel set in December for Brent blend.

Meanwhile, the Soviet Union, the world’s largest oil producer, has notified its contract customers that it will keep the official selling price of its Urals blend of crude oil unchanged at $28 a barrel, European oil industry sources said.

There was no official Soviet confirmation of a decision to hold prices steady in January. When there has been confirmation in the past, it typically came days after customers were first notified.

With Urals oil for January delivery trading Wednesday at $27 a barrel on the spot market, there were indications that oil customers of the Soviet Union might resist a price freeze.

Sensitive to Declines In New York, an international economist at the securities firm of Salomon Bros. Inc. said the Soviet Union, with its substantial reliance on income from oil exports, would be sensitive to additional declines in oil prices.

“It must be a major source of concern,” said Graham Bishop, a vice president at Salomon Bros. Another Salomon analyst, Paul Mlotok, said that if prices fall further, he would expect the Soviet Union to increase its exports to maintain revenue from oil sales.

Such a move could further depress prices, Mlotok added.

The Soviet Union produces an estimated 12.3 million barrels of oil daily and exports an estimated 1.75 million barrels a day to non-Communist nations, mostly in Western Europe, according to the Central Intelligence Agency.

It has held its Urals blend at $28 a barrel since October. Last summer, the Soviet Union had cut its price for Urals oil by $1.50 a barrel to $27.50.

Sources at several major European oil companies, who all spoke on condition that they not be identified, said the Soviet Union has offered spot cargoes of Urals oil at prices below the current official selling price.

One trader said his company had rejected a Soviet offer of oil at $27.50 a barrel as being too expensive.

Difficulty Finding Buyers A trader for a major European firm said he is having difficulty finding buyers for Urals oil, even at the current price. “I can’t find people who would touch it if it were $1.25 below the official price,” he added.

A supply officer for an independent Mediterranean refiner said that the Soviets have been sounding out “old and trusted customers” about selling them single cargoes of crude at a “temporary” $28-a-barrel price, which would later be retroactively reviewed.

Industry sources said they expected any new BNOC contract prices to be linked more closely to the volatile spot market, probably through BNOC setting prices monthly, rather than quarterly as in the past.

They said some independent North Sea suppliers are holding talks with BNOC about the new pricing structure.

Independent producers do not have the refineries and downstream marketing activities that influence the major oil company view of the price structure, traders said.

“The independent producers only concern is to sell crude at the highest possible price,” one trader said. For them, official prices related to a weak spot market would mean a loss of revenue that would cancel out the benefits of having a lower tax reference price.

The large integrated companies, on the other hand, are also purchasers of crude from BNOC as well as suppliers. So a cheaper crude price should mean healthier margins on refining activities for the integrated majors by reducing feedstock costs. This goes some way to canceling the disadvantages of a lower sale price to BNOC, traders said.

Traders said the situation is far more complex than two years ago, when BNOC’s customers and suppliers waited two months for a price to be set, until after OPEC made a $5-a-barrel price cut.