Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, July 28, 1990 TAG: 9007280293
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: Associated Press
DATELINE: GENEVA LENGTH: Medium
All 13 ministers of the Organization of Petroleum Exporting Countries signed an accord to notch up their target price immediately from $18 a barrel to $21.
OPEC President Sadek Boussena, Algeria's oil minister, said the agreement allows no cheating on production quotas "for any reason whatsoever."
OPEC is producing about 23 million barrels of oil a day, well over the ceiling of 22.1 million in effect in the first half of the year.
The cartel set a new production ceiling of 22.5 million barrels a day for the rest of the year.
Friday's agreement was struck a little more than a week after President Saddam Hussein of Iraq threatened military action against overproducers.
Chronic oil-cheaters Kuwait and the United Arab Emirates - targets of Hussein's anger - agreed to slash their output by hundreds of thousands of barrels a day.
Hussein claimed excess OPEC production cost financially strapped Iraq about $14 billion in lost oil revenues in the last year.
While the ministers made no mention publicly of the Iraqi threats, analysts said Hussein clearly influenced the outcome of the meeting.
If excess production is indeed curbed, crude prices could climb several dollars by year's end, when demand for oil increases with colder weather in the United States and other consuming nations, analysts said.
They said higher gasoline prices could follow.
Paul Mlotok, head of energy research at the Morgan Stanley investment firm in New York, predicted that with OPEC restraint, crude prices "could go up a couple of dollars a barrel" in the October-December period.
"This could add about five cents to a gallon of gasoline at the pump by the end of the year," he said.
Nauman Barakat, first vice president in the energy department at Shearson Lehman Hutton in New York, said gasoline prices could go up even higher - by about a dime a gallon.
"Gasoline prices are going to remain strong in the summer," he said. "They will get even stronger going into the winter period because of the agreement."
Every dollar decline or rise in the price of a barrel of oil amounts to a 2-cent to 5-cent change in gasoline prices.
Crude prices were expected to hold steady in August and September because of the glut of oil on the market, which sent prices tumbling in the spring.
The average price of a basket of crudes monitored by OPEC surged to $20.46 a barrel in early January, but skidded to $13.64 last month.
It has since rebounded to about $17.50, not far off the $18 target in effect since December 1986.
Saudi Arabia's influential oil minister, Hisham Nazer, predicted crude prices would "go beyond" the $21 reference price by December.
by CNB