In a clear move away from its traditional pricing and production quota policies toward responding to market forces, OPEC decided today to concentrate during the next six months on defending its share of the world market against such competitors as Britain and Norway.
The move appeared certain to touch off a price war in the coming months, and the price of North Sea crude on the Rotterdam spot market tumbled by more than $1 to about $27 a barrel as Venezuelan Oil Minister Arturo Hernandez Grisanti, incoming president of the Organization of Petroleum Exporting Countries, announced the change in direction.
Grisanti said at a press conference, "We are not seeking a price war," but earlier Mana Said Otaiba, oil minister of the United Arab Emirates, had told a local television interviewer that "we shall still make money even if the price falls to $20 a barrel."
OPEC's current benchmark price is $28 a barrel, but this has been ignored widely since the cartel last met on pricing in the summer. Also ignored have been the quotas that the cartel sought to impose on member states at the same time: the official ceiling on production from the 13 member states is 16 million barrels a day, but current estimates of production range anywhere from 17.5 million to 18.5 million barrels a day. Algeria and Libya sought to hold the line on the $28 price level at the three-day meeting that ended here today but were voted down.
Nigeria, whose economy has been shattered by the fall in oil prices, was equally hawkish at the meeting, but for different reasons. "Nigeria has made enough sacrifices to promote the ideals of OPEC," Nigerian Oil Minister Tamunoemi David-West said in a tough-talking press release issued midway through the meeting.
He made it clear that Nigeria regards Britain and Norway, whose North Sea oil is a direct competitor for Nigerian crude, as its main enemies. "David-West squares up for the North Sea," the press release said, promising that Nigeria would "meet the threat posed to Nigerian crude by the North Sea, barrel by barrel and cent by cent."
Other producers were less belligerent. Venezuela's Grisanti, who was elected president of the conference in place of Indonesia's oil minister, Subroto, said he would like to see the 16 million barrel per day level maintained.
In their final communique, the ministers said only that the cartel "maintains its previous decisions" on pricing and quotas, but oil traders attending the meeting as observers said both issues were effectively dead.
The conference decided to set up a new committee, headed by Grisanti, to discuss ways "of defending and securing for OPEC a fair share of the world oil market consistent with the necessary income for member countries' development." This committee will begin work immediately, Grisanti said at a press conference, and expects to report back to the next regular session of the conference on June 25.
He declined to detail what OPEC can do to defend its market share, but added: "The fact that OPEC members are now accounting for some 60 percent of the oil that is internationally traded should be a weapon for us."
Figures released last month by the Paris-based International Energy Agency estimated that OPEC's share of oil supplies to the noncommunist world in 1985 is about 37.6 percent of the total.
Saudi Arabia's oil minister, Ahmed Zaki Yamani, had been floating at the meeting the idea of a switch to market-related pricing systems, indexed according to spot rates, for a basket of competing crude oils.
Grisanti played down the idea of a price war at his press conference. "Nobody is interested in a depressed market," he said. "If prices come down significantly, then not only OPEC members will have difficulties, but non-OPEC members, too."
This veiled threat to the North Sea oil producers was seen by analysts attending the meeting as one reason why spot prices tumbled immediately afterward: OPEC -- or at least its Persian Gulf members -- claims that it can produce oil for about $3 a barrel while the comparable figure for the North Sea countries is around $18.
Most analysts attending the meeting said they expected spot prices to slip to somewhere between $20 and $25 between now and the next meeting, with the quota and pricing system being tacitly abandoned despite the cartel's claim that it is being maintained.