OPEC Meeting Breaks Up Without Quota Agreement

BRIONI, Yugoslavia — OPEC oil ministers, divided over long-term marketing strategy, on Monday adjourned their semiannual conference for a month after failing to agree on a new set of national production quotas.

The decision to adjourn the conference came after six days of difficult negotiations on this Adriatic island. Industry observers said it marked another setback to attempts by OPEC to reverse the dramatic fall in oil prices that has taken place over the past year.

A majority of the 13-member cartel had earlier reached a provisional agreement on setting a new overall production ceiling in the hope of boosting oil prices to between $17 and $19 a barrel by the end of the year from their present level of around $11.50. But industry sources said the accord would have little practical significance in the absence of a concrete agreement on individual national quotas.

Another Meeting in July

OPEC President Rilwanu Lukman of Nigeria told a news conference that the ministers will meet again in Geneva on July 28. He said they had reached a “tacit understanding” not to add to the cartel’s difficulties by increasing production levels in the meantime.

A closing communique issued by the conference made no mention of voluntary restraint in production. Asked about the understanding, ministers from Iran, Kuwait and the United Arab Emirates all said that they would abide by present quotas provided they were satisfied that other OPEC members were exercising similar restraints.

According to Lukman, OPEC oil production soared to 19 million barrels a day in June, some 2.7 million barrels above the target set by the ministers themselves at an extraordinary meeting in Geneva in April. On Saturday, a majority of the OPEC countries agreed to aim for a new ceiling of 17.6 million barrels a day for the rest of 1986.

A radical minority made up of Iran, Libya, Algeria and Gabon have called for much more drastic cuts in production in order to force the oil price back up to its mid-1985 level of $28 dollars a barrel.

Prices Expected to Fall

OPEC delegates and industry sources said they expected the oil price to dip slightly over the next few weeks--possibly to around $10--as a result of the failure to reach binding agreements here. They said the price for the rest of the year would depend on whether oil ministers reached an agreement on quotas at the July 28 meeting, with chances of success estimated at only 50%.

Under pressure from other OPEC members, Saudi Arabia has effectively abandoned an undeclared “price war” aimed at forcing unprofitable producers out of the market. The world’s largest oil producer is now publicly committed to restoring a minimum price of $17 for a barrel of oil over the next two years.

At the other end of the political spectrum, Iranian oil minister Gholamreza Aghazadeh indicated Monday that he was prepared to modify his earlier insistence on immediate action to boost prices back to $28 dollars a barrel. He told reporters that Iran was ready to accept an interim agreement on condition that it would push for $28 in six months’ time.