WORLD oil prices rose yesterday as Organisation of Petroleum Exporting
Countries ministers reached agreement in Geneva on an overall oil output
ceiling for the last three months of this year.
But prices retreated from their highs as the ministers continued talks
on how to allocate individual production quotas.
Opec secretary-general Subroto of Indonesia said ministers had agreed
to set the ceiling at 24,500,000 barrels per day (bpd), 900,000 above
the current 23,600,000 limit, but a bit less than what independent
monitors say Opec is currently producing.
''Opec has agreed the size of the pie but not how to divide it up.
There's still a long way to go,'' an oil broker in London said. November
futures for world benchmark crude oil Brent Blend peaked at $16.77 a
barrel in the morning, up 48 cents on the day, before drifting back to
$16.48.
Analysts said it would not be easy to get individual quotas right.
Kuwaiti Oil Minister Ali Ahmed al-Baghli said a quota for his country of
1,900,000 bpd ''would be out of the question''.
Oil prices began their climb soon after markets opened when an Iranian
delegate said that bilateral talks with Saudi Arabia had been good.
They gained a further boost after a dramatic phone call between Saudi
King Fahd and Iranian President Akbar Hashemi Rafsanjani seemed to give
impetus to the apparently deadlocked talks.
Oil ministers Hisham Nazer of Saudi Arabia and Gholamreza Aqazadeh of
Iran, long at odds in Opec over competing claims for market share,
breakfasted in Nazer's Geneva hotel suite. Then Opec agreed the new
ceiling.
The agreement implied that the Saudis and one or two others might
forego most if not all of a proportional quota rise. Those barrels would
be used to try to meet Kuwait's demand for a big increase as the price
of its return to a quota system.
It seemed that it might also be possible to give Iran a slightly
disproportionate increase. At any event, Saudi Arabia would be ceding
some percentage share of the Opec total.
The conversation about oil was reported on Teheran radio.
Subroto said it ''set the stage'' for yesterday''s accord on where to
fix a new Opec ceiling effective October 1.
Iran's Aqazadeh said the decision on the ceiling had only ended ''part
one'' of the Opec talks.
''Opec now has a ceiling but no walls,'' said Nauman Barakat,
vice-president for energy futures at Merrill Lynch who is in Geneva to
monitor the Opec meeting.
But he added that the Saudi initiative for mediators to shop around
among big producers for contributed barrels at least meant that ''they
have got an architect to design some''.
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