Word: nigerias
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...members of OPEC toward a second painful price cut. The countries immediately made plans for an emergency meeting next week in Geneva, where they hoped to devise a plan for holding the line on prices. But almost immediately after the meeting was announced, a member broke ranks. Nigeria, one of the poorest OPEC countries, cut the price of its Bonny Light crude by $2, to $28, in order to prevent a decline in sales. Nigerian Oil Minister Tarn David-West said the country had to place its own economic health on a higher priority than its loyalty to OPEC...
...Nigeria's decision made it more likely that other restless members, like Abu Dhabi, will tear away, possibly leading to anarchy among OPEC members and a sharp slide in oil prices. "This has got to panic every oil-producing nation," says Lawrence Goldstein, executive vice president of the Petroleum Industry Research Foundation. "In the next few days we will find out what OPEC is made of." Most oil-industry insiders believe, though, that the group will try to avoid cutting its price, at least by much. Their shared interest in keeping world petroleum prices stable will help resolve many...
Britain decided to cut prices on long-term contracts last week because its own "oil and similar varieties like Nigeria's Bonny Light were selling for discounts of at least $2 on the spot market, where prices float according to market conditions. As a result, producers were having trouble signing up steady customers. Said a Japanese buyer in the Persian Gulf: "We prefer reliable, long-term contracts to buying on spot, but the price difference is too big for us to pass up." In July the Japanese bought 25% of their oil on the spot market, compared with...
...soon. It will be extremely difficult for them to decide which members should cut back output and by how much. All the countries want to keep production up in order to keep money flowing in. Iran and Iraq have a four-year-long war to finance. Venezuela and Nigeria owe large debts to Western bankers. Reducing the official price from $29 to compete with Britain could start an all-out skirmish with non-OPEC producers. "The system is so inherently unstable," says William Randol, an industry analyst for the First Boston investment firm, "that the slightest slip can lead...
Nonetheless, other authorities maintain that the OPEC benchmark will have to come down at least $1.50, particularly since Nigeria is selling on the cheap. The true market price of oil, if all producers exported at will, would be about $20 per bbl., and OPEC must at least partially close the gap between that price and the official $29 level. Said Safer: "My guess is, the OPEC countries will come to their senses." In a speech to a gathering of energy experts in London, Energy Secretary Donald Hodel predicted last week that world prices could fall...