Sheik Ahmed Zaki Yamani, Saudi Arabia's oil minister, spelled out conditions today for an OPEC pricing compromise that put Saudi Arabia in conflict with Venezuela and cast doubt on the prospects of a deal at Wednesday's OPEC conference meeting.
Yamani told reporters his country would be willing to raise its oil price by as much as $2 a barrel to $34, but only if other OPEC members agreed to three things: price unification at that figure; reductions in current price differentials for premium crudes and a price freeze at the new levels "for a long period of time."
This appeared to leave Saudi Arabia at odds with Venezuela, which refused this week to agree to drop its price from $36 to $34 to achieve price unification. OPEC has not had a unified pricing policy since early 1979. Moderate members of the organization, led by Saudi Arabia, have been pressing for such a policy with the aim of restoring stability and confidence to the oil market.
Currently the price of OPEC oil ranges from a low of $32 a barrel charged by Saudi Arabia to more than $40 a barrel asked by the North African producers for their top-premium oil.
The clash between Saudi Arabia and Venezuela was seen as ironic since each country has held to moderate pricing policies in the past and strongly advocates OPEC pricing reunification. The two countries now find themselves taking conflicting positions that dim the chances of a compromise this week with the higher priced North African producers -- Libya, Nigeria and Algeria.
The African producers, who have been particularly hard hit with market losses as a result of slackened world demand and continued high Saudi production, have shown keen interest in finding a pricing deal that would provide relief.
Despite the appearance of a setback today in what had earlier been reported by OPEC officials as an approaching compromise, Yamani said he was "still optimistic" that a deal could be struck this week. But he estimated the chances of reaching consensus to be "a little more than 50-50."
If no compromise is struck, it would mean continued pressure on the North Africans and some other OPEC members to lower their oil prices unilaterally or else face even more drastic cuts in sales. Among the more seriously hurt so far have been Libya and Nigeria, whose oil production levels have dropped 50 percent or more this year as a result of excess world supply.
These producers had been hoping to persuade Saudi Arabia, which now accounts for nearly half of OPEC's estimated output of 21.5 million barrels a day, to cut production in exchange for a move by the militants toward price unity.
While current market conditions strengthen Saudi Arabia's efforts at forcing price reductions by other OPEC members, some oil industry experts expect a tightening of the oil market next year, and with it, renewed support for higher oil prices so that the Saudis might conceivably be encouraged to lift their own price to $36. This may be one of the factors in Venezuela's strategic thinking.
Venezuela's oil minister, Humberto Calderon Berti, today reiterated that he would not agree to a drop in his country's price of $36 per barrel, largely for domestic political reasons. Instead, he said he favored a unified OPEC reference price -- which serves as a base for setting prices of various grades of crude -- of $36 a barrel and a freeze at that level until the end of next year.
Calderon Berti said his position was supported by "more than one" other OPEC member, but the Venezuelan minister did not specify which ones.
Minutes later, Yamani was asked if he would go up to $36 a barrel in the interest of unification. "No way," he answered, and indicated that $2 a barrel was the maximum increase Saudi Arabia was willing to consider.
"We are happy with $32 per barrel, but we don't oppose a little increase," the Saudi minister said. In response to a question, Yamani said a $2 increase "would be very hard to accept," but he added that it was still possible, provided his three conditions were met.