OPEC Fails to Agree on Voluntary Output Cuts

The Organization of Petroleum Exporting Countries failed Thursday to reach unanimous agreement on voluntary production cuts to halt the oil price slide and, instead, began another attempt to break its long deadlock and set revised production quotas for its 13 member states.

This fourth OPEC ministerial meeting of the year is now likely to drift on into next week, with virtually no chance of any concerted action to bring down crude oil production. More than 20 million barrels of crude a day are pouring into the already glutted market, and prices have plunged to as low as $8 on some markets from about $32 a barrel last December.

Agreement on Quotas Needed

At the end of a three-hour meeting Thursday, Nigerian Oil Minister Rilwanu Lukman, the cartel’s current president, emerged to tell reporters that “nine or 10” of the 13 OPEC countries had made pledges of voluntary production cuts that would total 1.925 million barrels a day. “We have now concluded our work on voluntary cuts, and we are now going back to take up the question of quotas,” he said. “The more important thing is that we come to new permanent arrangements.”

Asked if the voluntary cuts would be put into effect, the OPEC president said that “if we agree on quotas, it will not be necessary.” Pressed about what would happen in the more likely event that there will not be an agreement on quotas, he said, “We will then examine the situation.”

Once again, Lukman declined to give any details of pledges for voluntary cuts, but it is understood that Iran, Iraq, Libya and Algeria flatly refused to join in and that the United Arab Emirates made its pledge conditional on unanimity.

On Wednesday, Lukman had announced that six members had pledged cuts of 1.6 million barrels a day and that he was hoping to get additional pledges for a total of at least 2 million barrels or more. The additional pledges given Thursday fall just short of this target, and, without unanimity, the whole exercise now appears to be dead.

There is even less likelihood that the fractured organization can come up with any mandatory quota system when it cannot even agree on limited voluntary cuts. Lukman said the starting point for resuming the quota discussion would be a formula presented at the organization’s last meeting a month ago on the Yugoslav island of Brioni, based on a total OPEC market share of 17.9 million barrels a day.

But Iraq is demanding that it must have the same daily quota of 2.4 million barrels as Iran would be given, instead of a proposed 1.6 million barrels. Iran says it will pump two extra barrels for every barrel that Iraq is given above 1.6 million.

Lukman Hopeful

The United Arab Emirates, now pumping about 1.6 million barrels a day, says it will accept nothing less than 1.5 million barrels daily instead of the recommended quota of 1.075 million barrels. Venezuela wants an increase of 150,000 barrels a day in its proposed quota of 1.7 million--and so on.

On Wednesday, Lukman was hopeful that by winning agreement on voluntary cuts, “we can gain a little breathing space and see a price rise, which would improve the atmosphere to take up the question of quotas later on.”

But, with voluntary cuts now apparently dead and the quota negotiations hopelessly deadlocked, oil prices may well now dip toward $5 a barrel.