OPEC schedules emergency quota meeting

Rattled by the recent fall in crude oil prices, the Organization of Petroleum Exporting Countries (OPEC) has called an emergency meeting of ministers for Mar. 16. Saudi Arabia has publicly declared itself willing to cut back oil production, providing other OPEC members do the same. The oil ministers of Iran, Indonesia, and Oman also have reportedly been pushing for a meeting. OPEC's urgency stems from the recent oil price fall, after the United Nations patched up differences between the

March 9, 1998

3 min read

Rattled by the recent fall in crude oil prices, the Organization of Petroleum Exporting Countries (OPEC) has called an emergency meeting of ministers for Mar. 16.

Saudi Arabia has publicly declared itself willing to cut back oil production, providing other OPEC members do the same. The oil ministers of Iran, Indonesia, and Oman also have reportedly been pushing for a meeting.

Falling prices

OPEC's urgency stems from the recent oil price fall, after the United Nations patched up differences between the U.S. and Iraq and agreed to hike Iraq's output under the oil-for-aid scheme (OGJ, Mar. 2, 1998, p. 51).

Since then oil prices have held relatively steady on international markets, but at their lowest in almost 4 years. Brent crude for prompt delivery closed at $13.27/bbl in London trading on Mar. 3, while Brent crude for April delivery closed at $14.04/bbl.

An OPEC official told OGJ on Mar. 4 that the organization had announced that morning it would hold an emergency meeting of ministers on Mar. 16, although agenda details haven't been released. The official said the four members of OPEC's ministerial monitoring sub-committee, charged with ensuring that members comply with quotas, had been due to meet on Mar. 16.

"This time," said the official, "all 11 ministers have been invited to attend. The oil price has fallen low enough to cause problems for OPEC, otherwise they would not all have been invited."

While the price is believed to be crimping the revenues of OPEC producers, there is a feeling that the price would need to fall below $13/bbl for Brent crude before members would unite behind a policy to cut output.

An early meeting

The Middle East Economic Survey (MEES) said Ida Bagus Sudjana, Indonesia's energy minister and current president of OPEC, had called for OPEC ministers to meet to debate market developments.

"The Indonesian minister's initiative is unlikely to meet with any broad consensus in the OPEC ranks," said MEES. "There is a strong feeling among key members-particularly Saudi Arabia and other Arabian Gulf producers-that there is no point holding an extraordinary ministerial meeting ahead of the regular June session."

MEES reports that, unless OPEC members have a broad agreement on production ahead of the Mar. 16 meeting, the exercise is almost certain to be counterproductive.

"However," said MEES, "some members would like to have an early meeting in the hope that this would force the issue. No OPEC action will be taken seriously by the market unless it comprises a credible cutback from actual production levels, and not just a formal reduction in quota allocations."