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Moderates Lining Up Against Iran : OPEC Panel Shuns Tehran's Demand to Raise Oil Price

December 09, 1987|From Times Wire Services

VIENNA — OPEC's moderate majority closed ranks Tuesday to fight off calls by radical Iran to raise world oil prices by 15% next year.

A key OPEC committee charged with assessing crude oil supply and demand trends decided to propose to a full ministerial session starting today that it leave its prevailing $18-per-barrel reference price unchanged.

Ecuadorean Oil Minister Fernando Santos Alvite, a member of the group's market monitoring committee, said the panel proposal was "to keep the $18 price."

He said the group would also propose ways to end the overproduction and price discounting that has weakened the Organization of Petroleum Exporting Countries' grip on the world oil price.

The proposal reflected widespread concern in OPEC that it is losing its control of world oil prices, which have fallen some $3 a barrel since August because member states have been pumping above their allotted quotas, analysts said.

Iran Holding to Demand

Delegates to the talks said many OPEC states were angry that Iran would publicly call for higher prices in the face of reports that it is offering discounts.

"What can Iran bargain with now?" one Persian Gulf delegate said privately. "The Iranians have nothing left."

Iranian Oil Minister Gholamreza Aghazadeh made clear to reporters when he arrived in Vienna that Iran would not back down from its demand that OPEC raise its official prices by $2.70 per barrel from its present $18 average reference price.

As Aghazadeh arrived, oil industry sources in Tokyo said Iran's clients there had received telexes from Tehran offering discounts of 20 to 30 cents a barrel below prices on the free market of similar quality crude, currently around $16.50 to $16.90 a barrel.

Aghazadeh also said his government would never accept a cartel arrangement granting war rival Iraq the same production quota as Iran.

The issue, which is expected to be a focus of the meeting, is also being closely watched by oil markets, which fear it could lead to a dangerous breakdown in OPEC unity, possibly unleashing a new flood of excess oil that could send prices into a tailspin.

West Texas Intermediate Down

Oil prices, which dropped sharply Monday, continued falling Tuesday because of worries about current and potential surpluses of oil. On the New York Mercantile Exchange, for example, West Texas Intermediate, the benchmark U.S. crude, closed at $18.08 a barrel, down 17 cents from Monday and off 66 cents from Friday.

Iraq's oil minister, Issam Abdul-Rahim, drew attention to the dispute Monday, when he warned that his country would increase its production if the cartel failed to give Iraq the same output quota as Iran.

Iran's quota is 2.37 million barrels a day, compared to Iraq's limit of 1.54 million. But Iraq has been exceeding that total by more than 1 million barrels daily, while Iran struggles to meet its official limit.

The two countries have been at war since 1980.

This week's OPEC meeting is particularly important for the cartel because its current system of prices and production is due to expire Dec. 31. Without a new agreement, prices would be expected to fall sharply.

Quotas to Be Reviewed

Besides attempting to agree on a common oil price for 1988, this week's OPEC meeting also will review production quotas. Some countries, such as Kuwait, have suggested that the current collective quota of 16.6 million barrels a day be increased to accommodate higher oil demand.

An increase in the official OPEC production ceiling probably would not allow members to raise their output, however, because the cartel is already exceeding the 16.6-million figure.

The International Energy Agency in Paris reported Monday that OPEC was producing 18.8 million barrels a day in November, down from 19.2 million in October.

Some industry analysts believe that oil demand may be no more than 17 million barrels daily in the first three months of next year, although it would be expected to increase by summer.

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