6 OPEC Members OK Voluntary Cuts in Oil Production : Talks Continue in Bid to Get 7 Other Members to Go Along

GENEVA —  Six of the 13 members of the Organization of Petroleum Exporting Countries have agreed to voluntarily cut oil production by a total of 1.6 million barrels a day in an effort to halt the plunge in prices, OPEC’s president told reporters here Wednesday.

Nigerian Oil Minister Rilwanu Lukman, the organization’s current head, added that negotiations were continuing with the other seven members to try to get at least 2 million barrels a day in voluntary cuts. He declined to name either the countries that have agreed to the cuts or the amounts that they are prepared to cut. Nor would he say whether the pact is contingent on OPEC unanimity, with all of the 13 countries contributing a cut of some kind.

“We are not making conditions on what is supposed to be a voluntary process,” he said. However, other oil ministers, including Sheik Ahmed Zaki Yamani, representing the biggest producer, Saudi Arabia, have said repeatedly that they are prepared to cut production only if all OPEC producers do.

Pressure on Hard-Line States

Nevertheless, the new development is at least a tactical breakthrough toward some kind of an OPEC agreement at this seventh ministerial meeting in 12 months, the fourth this year. Moreover, the fact that the OPEC president was prepared to talk to reporters about it in the midst of the negotiations is clearly designed to put the heat on the hard-line states, Iran and Iraq in particular, to come up with at least some token participation in voluntary cuts.

The six states that have promised cuts, according to sources, are Saudi Arabia, the United Arab Emirates, Kuwait, Venezuela, Nigeria and Indonesia. Iran, Iraq and Algeria are probably going to be the most difficult to bring along.

Lukman said OPEC production is now “around 20 million barrels per day” and “a voluntary reduction of 2 million barrels would be a good start, but we are hoping to get as much as we can.”

In attempting to reach a purely voluntary agreement, Lukman said the organization is temporarily giving up the abortive efforts of the last six months to fix new production quotas for individual members. But, he said, “the purpose will be to gain breathing space over the short term, reduce oil surpluses and hopefully see the price begin to rise again, when we can then return to the problem of quotas in a better atmosphere.”

He declined to say what a “short-term” period of voluntary restraint might be, but other conference sources are talking about meeting again in late September to review the situation.

Eventually, Lukman said, OPEC should aim for a quota system of 15 million to 16 million barrels a day to push the price back up to about $17 a barrel. A 42-gallon barrel of oil that sold for $32 in December is now bringing as little as $8 on some markets. In New York, oil futures are selling for a about $11 a barrel.

Lukman replied impatiently to questions about how effective voluntary cuts are likely to be, given that members have failed to observe the current quotas, and about how much impact a reduction of only 1.6 million or 2 million barrels a day might have on the glutted market.

“All of you came here telling us before we even met that it would be a failure and (that) OPEC is finished,” he said. “Well, our entire membership is sincerely anxious to get out of this current situation, and in our own interests we will make cuts on a voluntary basis, not maintained by quotas. “We are trying for maximum cooperation, and so far we are encouraged, but we are not yet at an end. We will leave no stone unturned, but we are simply asking all OPEC members, ‘How much will you contribute?’ . . . Well, if members agree voluntarily, then they will keep to their agreements.”