Oil ministers near pact?
Report: major producers to cut 305,000 barrels a day; broader pact due Friday?
March 12, 1999: 5:05 a.m. ET
LONDON (CNNfn) - Ministers from the
world's leading oil producers have
agreed to immediately curtail output by
305,000 barrels a day, a prelude to a
much broader reduction pact the group is
likely to reach when it reconvenes
Friday, according to a published report.
Oil ministers from OPEC members
Saudi Arabia, Venezuela, Algeria and
Iran and non-OPEC member Mexico
gathered in Amsterdam Thursday to
discuss a proposal to reduce the global
oil supply glut by about 2 million barrels
a day.
Adrian Lajous, the head of Mexico's
state-owned oil company, Petroleos
Mexicanos, told The Wall Street Journal
he was confident a broader agreement
would be struck Friday. The newspaper
cited individuals from OPEC as saying
Saudi Arabia, the world's largest oil
producer, had agreed in principal to slash
500,000 barrels a day as its share of the
production cutbacks.
Saudi Arabia is also apparently not
insisting that Venezuela - which has
failed to comply fully with the reduction
regime in the past -make substantial cuts
this time around, the Journal reported.
The pledges by Saudi Arabia would
bring its total production below the 8
million-barrel a day level, the newspaper
said.
The producers are under pressure to
strike an accord to reverse a 14-month
trend of sagging oil prices which has seen
crude dip from $20 a barrel in September
1997 to rock-bottom rates of below $10 a
barrel.
Though oil has rebounded slightly from
those lows in recent months, prices have
remained hostage to a stockpile build-up
that has been exacerbated by weaker
demand in many crisis-stricken regions.
Brent North Sea crude for April
delivery eased 28 cents Thursday in
London to end at $12.18. On the New
York Mercantile Exchange, April light
sweet crude fell 39 cents to $14.30.
The Journal said a
305,000barrel-a-day cut would enhance
the chances of a broader agreement by
putting an end to a Saudi dispute with
Iran, which has impeded compliance in
past pacts by arguing that its production
is 3.9 million barrels daily - or 305,000
barrels more than official figures
suggested.
A cut of 2 million barrels a day would
mark a near-3 percent reduction in total
daily global oil production of about 75
million barrels. The cuts would come on
top of about 2.6 million barrels in
previously agreed reductions. Those
pacts, negotiated last year, have only
been partially honored, with Iran and
Venezuela posing the greatest compliance
difficulties.
Even if OPEC agrees to the broader
cuts, analysts say, it may be several
months before supplies recover enough to
have an impact on prices.
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March 12, 1999
Oil Ministers Study Export Cuts to Aid Prices
By AGIS SALPUKAS
Oil ministers from five major oil producing nations met in the
Netherlands Thursday to discuss cutting crude oil exports in an effort
to further bolster the recent modest recovery in crude oil prices.
The discussions were taking place outside The Hague and included oil
ministers from Saudi Arabia, Iran, Venezuela and Algeria, which are
members of the Organization of Petroleum Exporting Countries, as well as
from Mexico.
The ministers broke up Thursday without issuing a statement and will meet
again Saturday.
Mexico joined Saudi Arabia and Venezuela last spring in an alliance to
push through production cuts of 2.6 million barrels a day in the face of a 40
percent wholesale price decline last year. The glut of crude oil helped keep
down gasoline prices, which normally rise in the spring as demand
increases. Without the efforts of the producers, some analysts said, crude
oil prices would have plunged even further.
Ali ibn Ibrahim Nuaimi, the oil minister of Saudi Arabia, has said that the
ministers would seek to hammer out a new accord between OPEC and
non-OPEC producers that would result in substantial new cuts.
Prices of crude oil, which have rebounded by about $3.30 cents a barrel
since mid-February, fell Thursday after surging on Wednesday.
Brent crude oil for April delivery fell by 9 cents, closing at $12.37 a barrel
on the International Petroleum Exchange.
The price of crude oil for April delivery fell 38 cents, or 2.6 percent, to
close at $14.31 on the New York Mercantile Exchange.
World demand has been rising slightly and production in such countries in
the United States has dropped as wells have been shut due to low prices.
The high level of inventories has also begun to drop.
But Ann-Louise Hittle, the director of international petroleum at Cambridge
Energy Associates, an energy consulting group in Cambridge, Mass.,
cautioned that if further cuts were not made inventories would again begin
to build in the second quarter.
"There's going to be some downward pressure on prices," she added.
One problem had been that OPEC and the countries cooperating with them
had failed to reach last year's goal of cutting 2.6 million barrels a day. In
February they had achieved only about 79 percent of the pledged cut,
according to a survey made by Bloomberg.
The current effort to cut production further is being led by Saudi Arabia,
which is the world's largest oil exporter. Like many other major oil
producers, its economy has been hit hard by the falling prices.
Copyright 1999 The New York Times Company
nytimes.com
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