Opec: An Early- Morning Truce

At 3:30 a.m. last Wednesday, an exhausted Rilwanu Lukman, the Nigerian Oil Minister and president of the Organization of Petroleum Exporting Countries, emerged from a conference room at Geneva’s Intercontinental Hotel to announce that the cartel had ended its longest meeting ever. After 17 days of bitter wrangling, OPEC had agreed to renew its two-month-old pact to keep oil production down in an effort to push up prices. The group intends to hold daily output to 17 million bbl. a day, up only slightly from the current 16.8 million bbl. a day.

At the start of the fractious meeting it seemed that any agreement might be scuttled by Kuwaiti Oil Minister Ali Khalifa Al-Sabah and his Saudi Arabian counterpart Sheik Ahmed Zaki Yamani. Kuwait and Saudi Arabia, OPEC’s two richest members, had insisted on bolstering their production by some 10%. In the end, Saudi Arabia accepted no increase for itself and instead offered to donate its share of the 200,000 bbl.-a-day production hike to Kuwait.

But the temporary pact, which holds only through the end of the year, did not impress oil traders. After the announcement, the price of a barrel of West Texas Intermediate Crude fell from $15.19 to close the week at $15.02. OPEC must meet again in December to set 1987 production levels, and many analysts think the current agreement may collapse, perhaps sending the price of oil back below $10 per bbl.