A majority of OPEC oil ministers reached provisional agreement here today on a new production ceiling in an attempt to raise oil prices to between $17 and $19 a barrel by the end of the year.
The provisional agreement, announced by OPEC president Rilwanu Lukman of Nigeria, was immediately denounced by ministers representing Iran, Algeria and Libya. The radical minority within the 13-member cartel has been pressing for much more drastic action to boost oil prices back up to $28 dollars a barrel from their present level of about $11.50.
Oil prices have tumbled over the past six months because of overproduction and the reluctance of Saudi Arabia, the world's largest oil exporter, to reduce its own quota in order to maintain the price. Nonmembers like the United States and Britain have refused on both political and economic grounds to cooperate with OPEC in maintaining a high price for oil despite the threat to domestic producers operating on low profit margins.
According to OPEC delegates, the new production ceiling adopted by the 10-member majority for 1986 is 17.6 million barrels a day. This represents a drop of 1.4 million barrels from present production levels, but is 1.6 million barrels higher than the target that was set at an extraordinary OPEC conference in Geneva in April.
Oil industry sources said that the clear divisions within the Organization of Petroleum Exporting Countries, and the present glut in world oil markets, could make even today's compromise production ceilings difficult to achieve.
The 13 oil ministers adjourned their discussions today to allow Indonesian Energy Minister Subroto to hold talks with individual delegations on new national production quotas. Subroto is expected to report back Sunday to the conference, which has been in session on this lush Adriatic island used by the late president Tito as his summer retreat.
In a relaxed mood as he walked through the pine woods near the conference center, Saudi Oil Minister Ahmed Zaki Yamani said that Saudi Arabia had no intention of cutting back on its existing quota of 4.53 million barrels a day.
Today's agreement effectively means that most OPEC countries have abandoned any immediate hope of pushing the oil price back up to $28 a barrel, as agreed earlier this year. The present strategy of the moderates led by Saudi Arabia is to prepare the ground for a gradual long-term increase in prices by forcing non-OPEC producers to abandon unprofitable investments.
Rejecting the compromise agreement out of hand, Algerian Oil Minister Belkacem Nabi told reporters: "Nobody has made any proposals. There is nothing on the table. There are just empty dishes."
Iranian Petroleum Minister Gholamreza Aghazedah, who had been pushing for an immediate production cut to 16 million barrels a day, said that the strategy adopted by the majority would not solve the basic problem of prices. He also made clear that he would object to any increase in the quota allocated to Iraq, Iran's bitter enemy in the Persian Gulf war.
Political analysts said that one reason Iran is desperate to secure an immediate price increase is that it relies on its dwindling oil supplies to finance the war. Iraq, on the other hand, continues to rely on Saudi support to make up its war losses.
Delegates representing the 10-nation OPEC majority said that the new 17.6-million-barrel-a-day ceiling for 1986 should push prices up to between $17 and $19 by the end of the year. They appear to have based their calculations on an assumption that some non-OPEC producers, such as Norway and the Soviet Union, will cooperate in restricting output.
Conference sources said that the OPEC majority would aim for a production ceiling of 17.4 million barrels a day for the third quarter of this year and 17.9 million barrels for the last quarter.