A clash between OPEC's two largest oil producers, Saudi Arabia and Venezuela, frustrated agreement today on a lowered production ceiling as the oil cartel opened emergency talks here intended to reduce a worldwide petroleum surplus and halt a plunge in prices.
The 13-member Organization of Petroleum Exporting Countries was reported to agree tentatively on an 18-million-barrel-a-day production ceiling, about 500,000 barrels below current production, but the countries put off until Saturday the more difficult decisions on how the production should be apportioned among them. Many have already been hard pressed by the reduced consumption.
While OPEC considers agreement on a reduced ceiling an important show of unity for the shaky cartel, a number of industry experts remained doubtful that a ceiling of 18 million barrels a day would make a difference in stabilizing the oil market, in which demand recently has been 2 million to 3 million barrels under daily production.
"We have not come to final agreement yet," Indonesian Minister Subroto told reporters after today's session. He said production quotas have been agreed upon tentatively but still required ministers meeting here to seek approval in their capitals.
Toward the end of today's meeting, Saudi Arabia's oil minister, Sheik Ahmed Zaki Yamani, summoned two reporters to announce that OPEC had agreed on a ceiling of 18 million barrels a day of oil and would attempt to maintain unchanged a benchmark price of $34 a barrel.
But shortly afterward, Venezuelan Oil Minister Humberto Calderon Berti swept angrily through the lobby of the Vienna hotel in which the ministers had met and declared: "There is no agreement."
Conference sources also reported that Iran was resisting whatever terms of agreement Yamani had in mind.
In dispute, according to delegates, was the specific production cuts each OPEC member is being asked to make. Venezuela, whose economy heavily depends on oil revenues, has already seen an erosion in its production from 2 million barrels a day to 1.7 million in recent weeks as a result of a collapsing world market. Iran has hoped to increase its oil exports to finance its war with Iraq.
The OPEC meeting is scheduled to resume Saturday, when it could be upgraded from a consultative to an extraordinary session that would enable the ministers to give formal sanction to the production levels.
Saudi Arabia and Venezuela have traditionally been viewed as OPEC moderates bent on preserving the cartel's unity. But the rich Arab kingdom and the fiscally strained South American republic clashed last summer over an attempt to compromise their prices. The current flareup seems again to reflect contrasting consideration about the balance of sacrifices that must be reached within OPEC if the organization is to survive.
Country-by-country output levels called for under the proposed ceiling were not disclosed and would appear not to have been fully resolved yet. OPEC's secretary general, M. S. Nan Nguma, said "some technical things" still had to be worked out before the OPEC ministers reconvene.
It was suggested that the production shares could still be juggled to satisfy Venezuela and Iran, or alternatively, the proposed ceiling could be raised somewhat. Saudi Arabia is thought to have come under pressure to cut its own production below the 7.5 million barrels per day that it announced earlier this month would be the level for March--a figure which the Saudis said represented a drop of 1 million barrels per day.
The exact level of current OPEC production has not been officially stated, but industry publications place it around 18.5 million barrels per day. More than half of the cartel's members have closed substantial portions of their production in recent months as potential buyers have walked away.
There appears to be little room for countries such as Algeria, Libya, Venezuela, Indonesia, Ecuador, Iran and Iraq to cut production further without risking severe fiscal problems.
But the ministers evidently hope that the demonstrative fixing of a ceiling will at least carry a psychological premium that can stem the price-cutting mentality that has gripped the oil market and threatened to collapse OPEC's pricing system.
Britain, which does not belong to OPEC, started the latest panic by dropping the price of oil from its North Sea fields by $5.50 in recent weeks to $31 per barrel. Mexico, also not an OPEC member, and Venezuela cut their prices $2.50 to shore up falling production.
Britain's move has created a sharp discrepancy with OPEC's premium-price African producers, threatening particularly hard-pressed Nigeria, whose official price is $36.50 per barrel. Nigerian delegates would not say whether the proposed new ceiling and assigned production shares would be sufficient to prevent a feared cut in Nigerian oil prices that could, by some accounts, precipitate a general oil crash.