Outlook bleak for large increase in OPEC production

Boost could be undercut by current quota cheating

March 26, 2000|By NEW YORK TIMES NEWS SERVICE

VIENNA, Austria -- Despite unusually public pleas by the Clinton administration for relief from high oil prices, few signs of support for a big increase in oil production emerged as ministers from petroleum-exporting countries arrived here yesterday for crucial meetings.

Two days before the Organization of Petroleum Exporting Countries is scheduled to consider an increase in output, members of the 11-nation cartel remained divided and were girding for grueling negotiations throughout the weekend.

"I think it is too early to decide now," said Obaid bin Saif al-Nasseri, the United Arab Emirates' oil minister, as he entered his hotel early yesterday afternoon. "We have not discussed all the possibilities and all the options. My recommendation is to wait for some time."

As in the past, the most important disagreements are between Saudi Arabia and Iran, the two largest producers within OPEC. Saudi officials have been pushing for an increase in production of between 1 million and 1.5 million barrels a day.

Iran has repeatedly argued for much smaller increases, and its position has hardened as oil prices have retreated from recent highs of more than $30 a barrel.

Iran has also lashed out at the United States, where lawmakers are pushing for sanctions against OPEC countries. U.S. Secretary of Energy Bill Richardson has lobbied OPEC countries in a whirlwind tour.

"OPEC should not opt for a big increase under political pressure," Iran's oil minister, Bijan Zangeneh, said on the country's state radio before departing for Vienna yesterday.

Warning that a rash increase could lead to a "catastrophe," Zangeneh said OPEC nations "must move with the market and seek stability. We hope OPEC will make a decision based on economic justifications, not political."

In a further indication that OPEC leaders will agree on only modest increases, the Reuter news service quoted an unnamed official from a Persian Gulf state as saying that the leaders were "near an agreement" to increase production to the levels envisaged by the Saudis.

That in itself would not necessarily have much impact on oil prices.

Analysts say the crucial question is whether the increase comes on top of or merely substitutes for the cheating on oil quotas that is already taking place.

Industry analysts estimate that OPEC countries and the four nations that joined in the production cuts one year ago -- Mexico, Russia, Oman and Norway -- are already overshooting their target of 23 million barrels a day by about 1 million barrels.

If OPEC leaders agree to increase quotas by 1.5 million barrels but clamp down on cheating, the net effect would be negligible.

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