OPEC oil ministers unanimously agreed today to set up a five-man committee to police pricing and production policies of the 13-nation cartel, but they deferred a decision on how the committee will operate and how much enforcement power it will have.
The question of narrowing the differential between heavy and light crude oils was postponed as the meeting was scheduled to go into an unprecedented fifth day Saturday. The ministers already had met for two days before Christmas and then recessed to allow heads of state to approve the policing plan for maintaining the $29 a barrel benchmark price and the production ceiling of 16 million barrels per day.
Ecuador and Nigeria, the last two holdouts, fell into line to enable the cartel to announce what Indonesian Oil Minister Subroto, chairman of the current meeting, said was "a landmark decision for OPEC." Members of the committee that will police production and pricing policies are Venezuela, Saudi Arabia, Nigeria, the United Arab Emirates and Indonesia. Saudi Oil Minister Ahmed Zaki Yamani will be the chairman.
Exactly how the committee will operate, what powers it will have to enforce production and pricing limits on members of the Organization of Petroleum Exporting Countries and whether or not it can impose sanctions on them if they do not toe the line, remained unclear. Subroto said these questions would be addressed along with the differentials issue at Saturday's session.
Subroto told reporters that he was certain the meeting would end Saturday. "I think everyone wants to get home for New Year's Eve," he said.
While the formation of the enforcement committee was hailed as a significant achievement by OPEC officials, oil market observers remained skeptical about whether it would be able to whip the cartel's members into line. Although the OPEC ministers decided in October to set a ceiling of 16 million barrels a day on production and to hold the price line at $29 per barrel, both decisions have continued to be flouted, with several nations -- Iraq, Iran and Nigeria have been mentioned most frequently -- producing and selling more than their quota.
Moreover, spot prices have been consistently $1.50 below the OPEC benchmark price since the October meeting. Observers said the question of how the new committee would put teeth into the October resolution remained the key to the success or failure of the body.
Today's meeting also slightly revised the composition of OPEC's market monitoring committee, which keeps an eye on production in the member states and reports directly to the ministers. Mana Said Otaiba, oil minister of the United Arab Emirates, remains as chairman of the committee, which also will include representatives of Libya, Iran, Algeria and Ecuador.
Still to be resolved was the question of whether to narrow the differential between heavy and light crudes, which Otaiba has warned is crucial to his acceptance of the enforcement committee.