OPEC Reported Near Accord on Boosting Output

DHAHRAN, Saudi Arabia — Oil ministers from the Organization of Petroleum Exporting Countries are nearing an agreement that would allow Saudi Arabia and other OPEC countries to begin pumping extra oil to make up for lost supplies from Iraq and Kuwait, sources familiar with the talks said Sunday.

The OPEC ministers, meeting informally in Vienna, appear close to consensus on a plan that would allow the group’s members to exceed their individual quotas as long as total oil production does not exceed OPEC’s overall ceiling of 22.5 million barrels a day, the sources said.

OPEC would have to convene in formal session before giving final approval to any agreement, which sources here said could be completed as early as today. But even if no agreement is reached, Saudi Arabia has said it is prepared to begin pumping an extra 2 million barrels a day in an attempt to stabilize the market in the wake of the Persian Gulf crisis.

“We believe they will reach an agreement to allow people to produce within the (overall) quota limit. . . . A consensus is emerging,” said one source, adding that Saudi Arabia intends to increase production with or without OPEC’s blessing.

A majority of OPEC members now appear inclined to go along with Saudi Arabia’s position, Saudi officials believe, because to do otherwise would be to risk destroying the oil cartel and whatever future influence they may be able to wield via their membership in the organization.

“In the back of their minds, they know we have both the capacity and the ability to increase production and they know we will,” said one source familiar with Saudi Arabia’s position in the talks.

“What you are seeing is Saudi Arabia almost being able to dictate to OPEC, almost being able to control the oil market. Do the other people want to have a working relationship with Saudi Arabia, or do they want to throw OPEC out the window and let Saudi Arabia run the show?”

There was no announcement in Vienna, the site of the talks, that any agreement is pending. Ministers from all but two of OPEC’s 13 member nations--Iraq and Libya--arrived Sunday for the informal talks. A vote of seven members will be required to call an emergency formal conference, and at least 10 would have to attend.

Algerian Oil Minister Sadek Boussena, the cartel’s president, told reporters Sunday that officials would try to “minimize as far as possible the negative impact” of the Persian Gulf crisis, which has sent oil prices soaring past $30 a barrel.

“The only thing we have in mind is to save OPEC,” Boussena said.

World oil production has fallen by an estimated 4.5 million barrels a day because of the international trade embargo imposed on Iraqi and Kuwaiti oil following Iraq’s Aug. 2 invasion and subsequent proclaimed annexation of the tiny gulf emirate.

Iraq and Kuwait together possess about 20% of the world’s oil reserves. Saudi Arabia, however, controls more than a quarter of gulf oil production and has historically sought to keep oil prices moderately low in an effort to encourage long-term demand.

Following the crisis in the gulf, Saudi Oil Minister Hisham Nazir announced that Saudi Arabia was prepared to begin pumping an extra 2 million barrels a day, on top of the 5.38-million-barrels-a-day quota assigned by OPEC at its most recent meeting in July.

At that meeting, OPEC ministers agreed to restrain production to 22.5 million barrels a day in the last half of the year in an effort to drive prices up to a new target of $21 a barrel.

That benchmark price was quickly surpassed because of the gulf crisis, and some OPEC members without the ability to increase production have reportedly been reluctant to allow other OPEC members to cut into the new pricing windfalls by boosting production.

Saudi Arabia has argued that allowing some increase in oil output to make up for the losses of Iraq and Kuwait is necessary to preserve long-range demands for OPEC oil. The Saudis are still smarting from a 1970s oil embargo that brought enough conservation measures and alternative energy development in the West that demand has still not fully recovered to pre-1970s levels.

The agreement Saudi officials are pushing for now would allow OPEC members to exceed their individual quotas to make up for lost oil from Iraq and Kuwait, as long as the overall 22.5-million-barrels-per-day ceiling is not exceeded.

Venezuela’s oil minister, Celestino Armas, told reporters in Vienna that his country will increase output by an important percentage because of the possibility that the oil crisis could be an extended one.

Industry analysts say that Venezuela could increase production by up to 500,000 barrels a day over its OPEC quota of 1.9 million barrels. The United Arab Emirates, Nigeria and Libya also have the ability to pump extra oil, and there are indications that the United Arab Emirates is also prepared to move forward to increase its production, according to some sources.

Analysts said much of the remaining shortfall could be made up by non-OPEC producers in Mexico, the United States and the North Sea.

Saudi officials, along with Venezuela, were unsuccessful in attempting to convene an emergency OPEC meeting last week. But Saudi Arabia has persisted in trying because it wants to preserve the oil cartel and is seeking “political sanction” for increasing its production, according to sources familiar with the Saudi position.

“It’s exactly the way George Bush did it with the U.N.,” said one source, referring to the Administration’s urging the U.N. Security Council to support the use of military force to enforce a trade blockade against Iraq.

OPEC member nations are Algeria, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.