OPEC Wrestles With How to Allot Output

OPEC negotiations stalled Tuesday as cartel ministers tried to hammer out an agreement on how to allot a proposed cartel-wide production increase among its 13 member nations.

“I can certainly say there’s a spirit of reaching an understanding. . . . (But) a lot of work needs to be done,” said Iranian Oil Minister Gholamreza Aghazadeh.

“It’s a deadlock,” said a delegate from one nation, who demanded anonymity.

Continuing talks over a possible hike in the official production ceiling came as a new report indicated the Organization of Petroleum Exporting Countries lifted output in May to its highest level of the year, surpassing its current ceiling.

An official of one delegation said a proposal had been made to raise the cartel’s output ceiling from the current 18.5 million barrels a day to 19.5 million in the July-December period.

The additional production would be divided proportionately among all members, said the official, who demanded anonymity.

Kuwait has insisted on a larger share and several other countries would like special treatment.

The United Arab Emirates’ Mana Said Oteiba told reporters he wanted OPEC to boost its daily production limit to between 20 million barrels and 21 million barrels.

The nation persistently has pumped more than its individual quota, although Oteiba refused to say how much he would like of the proposed additional cartel output. “As much as we can get we would love to have,” he said.

“The key issue is to get everybody within the new umbrella of 20 or 20 plus (million barrels a day) as a new ceiling,” said Oteiba.

Other members have said no country should be given more output than others.

Libya’s Fawzi Shakshuki said if another country wins “special treatment . . . Libya will ask for that.”

The OPEC ministers have been trying to resolve their disputes since last Friday. They opened a formal strategy conference Monday before returning to private bargaining.

OPEC nations agreed last November on a production ceiling of 18.5 million barrels a day for the January-June period, well under actual output levels of that time, in an attempt to support a price of $18 a barrel for their oil.

Prices have risen since then, with the price of a basket of crudes monitored by OPEC now more than 40% above the level of late November.

On the New York Mercantile Exchange, the contract for July delivery of West Texas Intermediate, the benchmark American crude, closed down 6 cents Tuesday at $20.46 a 42-gallon barrel.

The ministers apparently have settled on retaining the $18 benchmark, although Saudi Arabia had recommended scrapping the target price.

“OPEC seems to be happy with a pricing level around $18,” said Oteiba.

Separately, the International Energy Agency reported the OPEC nations lifted their crude production by 500,000 barrels a day in May to 21 million barrels, the highest amount so far this year.

Kuwait, Nigeria Lead Increase

Higher production by Kuwait and Nigeria accounted for much of the May increase, it said.

The agency’s Monthly Oil Market Report estimated Saudi Arabia produced 4.8 million barrels a day in May. Its OPEC-set supply quota is 4.5 million barrels a day.

Iran and Iraq each produced about 2.8 million barrels a day in May, it said.

The output for Kuwait and the United Arab Emirates was estimated at 1.6 million barrels a day, well above their OPEC supply quotas of about a million barrels a day.

Nigeria produced some 1.6 million barrels a day, ahead of its supply target of about 1.4 million barrels.

The report estimated Venezuela’s production at 1.6 million barrels a day, the same as its quota, and Ecuador’s at 300,000 barrels, up from its quota of 230,000 barrels.

Other production estimates were: Libya, 1 million barrels; Algeria, 700,000 barrels; Indonesia, 1.2 million barrels; Libya, 1 million barrels, and Gabon, 200,000 barrels.