With the world oil market softening under them, OPEC oil ministers began what are expected to be difficult negotiations here today, lokking primarily for an agreement on prices that would persuade Saudi Arabia to cut back its oil production.
As the 13 ministers gathered at a Geneva hotel, the Saudi oil minister, Ahmed Zaki Yamani, offered what appeared to be a trial bargaining bid. He told reporters his country would raise its own prices -- and presumably trim production -- providing the other members of the Organization of Petroleum Exporting Countries lowered their rates.
The offer reflected Saudi Arabia's interest in achieving greater pricing coherence in the oil market and narrowing the wide range of oil prices which stretches from $32 for a barrel of Saudi light crude to $41 for Libya's high-quality stock.
The current world oil surplus has given Saudi Arabia, OPEC's biggest producer, considerable leverage over its partners. Yamani is thought to be using it to win more moderate pricing from his fellow oil ministers and consideration for a long-term OPEC pricing formula.
The other ministers, in turn, want Saudi Arabia to participate in an OPEC production cutback that would help tighten the market. Saudi offcials recently put their country's oil production at 10.3 million barrels per day, substantially above its normal 8.5 million barrel output.
A general oil price rollback appeared to be out of the question.
"I will not cut prices," declared Libya's oil minister, Abdussalam Mohammed Zaggaar. He called on the Saudis to fix a new OPEC benchmark at $37 per barrel of oil, $1 above the mark set last December.
A majority of the OPEC ministers appeared to favor an agreement that would at least freeze prices at the upper level, but would still likely require Saudi Arabia to raise its price.
Asked by reporters whether he would agree to a price rise to $36 per barrel, Yamani shook his head. Asked whether he would accept $34, the Saudi oil minister smiled and shrugged, indicating that perhaps he could.
There were some signs during the day that the oil leaders were moving toward a compromise. In the morning, the oil minister for the United Arab Emirates, Mana Said Oteiba, at first sounded very resistant.
"I'm not going to lower my price even if I have to shut off production completely," he said. "I'd be happy to shut off completely even for a couple of years."
But after several hours of private talks in hotel rooms this afternoon, Oteiba told reporters; "I am optimistic that we might do somethin to narrow the gap between various prices of crude."
Today's formal session did not deal directly with pricing and production, but ministers are expected to focus on them Tuesday.
Weighing importantly in their considerations is the mix of reasons for the current glut. In addition to high Saudi production which has affected supply, two developments have reduced world demand for oil.
One is the economic slowdown in many oil-consuming nations, which is considered temporary. The other is a pronounced move to energy conservation and alternative sources of energy in many Western nations. This is more worrisome for the oil producers.
Until at least the recession elements drop away, OPEC nations appear unwilling to make long-term commitments on pricing strategy.
Oil consumption in the Western world is now running about 1.5 million to 2 million barrels of oil less than what is being made available. The surplus has brought a sharp drop in the price of oil sold on the spot market, a term used for individual shiploads of oil that change hands outside long-term contracts.
Since mid-November, the spot market price of Arabian light crude has dropped from about $40 per barrel to $34-$35 per barrel, according to industry experts.
The surplus and low spot prices have already forced Nigeria, which along with Algeria and Libya charges the highest oil premiums, to reduce its production this year. Kuwait also reportedly has cut back.
Meantime the Saudis are coming under increasing pressure to reach a compromise with their OPEC partners.
The pressure comes from several sources. One is the worry that continue to flood the oil market courts the danger of a loss of control and wild pricing behavior.
Compounding this concern is the interest Iran and Iraq have expressed about increasing their own production levels following a sharp falloff in their oil exports when war broke out between them last year.
Saudi Arabia could also risk political disunity in OPEC by pressint too hard for a pricing agreement. Also, within the roval Saudi house and among officials advisers, there is reported questioning of the strategy Riyadh has been pursuing, on the ground that sustained high production is depleting the nation's precious oil reserves.
For the moment, however, a surplus clearly plays to Riyadh's advantage to win OPEC support for a formula that would tie the price of oil to several factors, including the inflation rate of industrialized countries, currency fluctuations and the average growth rates of Western countries.