OPEC DEFERS TOUGH DECISIONS AT VIENNA MEETING

Organization of Petroleum Exporting Countries ministers, as expected, have rolled over members' production quotas for another 6 months.

The rollover will maintain OPEC's target production total at 24.52 million b/d of oil until the end of June 1996. Production quotas beyond then will be set by ministers at their next major meeting, in Vienna June 5, 1996.

Before the Nov. 21 meeting in Vienna analysts warned that OPEC needed to cut quotas to ease underlying market problems (OGJ, Nov. 13, p. 34). Yet despite OPEC's lack of action, oil prices have risen since the meeting.

The price of Brent crude oil for January delivery was $16.83/bbl at close of business Nov. 20 and fell slightly to $16.76/bbl by the end of Nov. 23. By close of trading on Nov. 29 Brent crude was priced at $17.08/bbl.

Lindsay Horne, executive director of the energy derivatives group at Lehman Bros. Ltd., London, said the outcome of the OPEC meeting was no surprise and declared the 6 month rollover a negative move.

"Every economist has shown there will be a seasonal shortfall in June," said Horne, "when supply and demand will be seasonally out of kilter. This will be a bad time to discuss the next quotas."

Horne said the meeting had turned out "a bit of a joke" in that markets were short on crude anyway because of a hurricane cutting back Mexico's output and delays in bringing on stream Heidrun and Troll fields off Norway.

"The market tightened further on Nov. 22 when a refinery closure in Houston caused a price rally," said Horne, "and traders are now panicking over potential curtailment of Russian exports. The market is up not because of OPEC but on other matters."

Horne expects oil prices to remain stable for about 3 months, with a wave of selling because of "decent" prices before they begin to slide.

"Refiners are sitting there hoping for the mother of all winters."

GABON'S EXIT?

During the meeting Gabon was expected to withdraw from OPEC,having been unable to keep up with annual membership payments, which are the same for all countries regardless of oil revenues.

Gabon is probably least influential of OPEC's members, with the organization's smallest production quota of 287,000 b/d of oil. Of Gabon's exit from OPEC, Horne said, "I don't think anyone cares."

Yet it appears Nigeria cared enough to request OPEC continues to negotiate with Gabon over ways to maintain its membership. A reduction in membership fees was rejected, however.

Middle East Economic Survey (MEES) said OPEC may look to keeping Gabon in the fold by making the country an associate member or an observer without quota obligations or voting rights.

"For the time being, formally speaking," said MEES, "Gabon remains a member of OPEC with a listed production quota of 287,000 b/d within the current ceiling of 24.52 million b/d.

"But for all practical purposes Gabon is no longer subject to any quota obligation."