Newspaper article THE JOURNAL RECORD

OPEC Ministers Aim for Unity in Geneva / Try to Head off Price War

Newspaper article THE JOURNAL RECORD

OPEC Ministers Aim for Unity in Geneva / Try to Head off Price War

Article excerpt

NEW YORK (AP) - Oil ministers of the 13 OPEC nations are converging on Geneva in another attempt to resolve the contentious problems of production and pricing that continue to fuel talk of a possible price war.

Individual production quotas as well as the cartel's overall production ceiling and its pricing system are expected to lead the agenda of Saturday's meeting, the fifth formal gathering of the Organization of Petroleum Exporting Countries this year.

At stake are the fragile economies of several nations that depend heavily on petroleum exports, along with the health of numerous banks, oil companies and even some U.S. states that rely on oil royalties for revenue.

Venezuela, a member of the cartel, wants to scrap the current rigid price system and is proposing to link production and prices more closely to trends in the open market.

Sheik Ahmed Zaki Yamani, oil minister for Saudi Arabia, the world's biggest oil exporter, has warned that violations of OPEC's current system threaten a price war that could send prices plummeting to less than $20 a barrel from the present average of about $29.

That kind of drop, analysts say, would be a severe blow to Venezuela and several other OPEC members - Algeria, Ecuador, Indonesia, Iran, Iraq, Libya, Nigeria and the United Arab Emirates.

Mexico, Norway and Great Britain, which do not belong to OPEC but are major oil exporters, also would suffer, analysts say.

There would be winners, too. Economic growth would be buoyed in much of the world by cheaper energy, while inflation and interest rates would nosedive, economists say.

But despite the high stakes for OPEC, little progress is expected at its latest meeting.

Similar meetings on Jan. 28, July 5, July 22 and Oct. 3 all resulted in patchwork agreements on minor changes in prices or quotas - without the usual unanimous support of OPEC's members - or in no significant policy agreements at all.

On Tuesday, Platt's Oilgram News, a respected industry newsletter, noted that Kuwaiti Oil Minister Ali Khalifa al-Sabah had told a Kuwaiti newspaper that he does not expect any decisive action fromthe Geneva meeting ""because it comes at a time of increased demand for OPEC oil.''

Petroleum prices have been holding firm lately, bolstered by the seasonal demand for heating oil and by refiners keeping inventories low in expectation that prices will dip when demand slows in thespring.

But some people in OPEC warn that a failure by the cartel to resolve the production and price disputes now could bring a price war.

In an interview published Tuesday in the Saudi Arabian newspaper Al-Sharq Al-Awsat, United Arab Emirates Oil Minister Mana Saeed Oteiba declared that ""a price war is inevitable'' unless the OPEC nations agree in Geneva to stick to the cartel's guidelines. …

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