Hopes that OPEC will reach a price-bolstering agreement at its meeting in Geneva on 25 March depend upon Kuwait’s willingness to agree to a pro- rata cut in production.
All other OPEC states have indicated willingness to act to reduce combined crude oil production by up to 10 per cent for the second and third quarter of the year provided the cuts were spread proportionately.
However, Kuwait has persistently declared that it should be given special treatment and allowed to have an OPEC allocation equal to the UAE’s. OPEC’s September 1993 agreement set the UAE’s allocation at 2.16 million barrels a day (b/d) and Kuwait’s at 2 million (b/d) for the six months ending 31 March. If parity with the UAE is to be achieved, Kuwait would have to be allowed to cut production by a smaller proportion than the other 11 OPEC member states. This is something that Saudi Arabia has said it would not accept.
Doubts about OPEC’s capacity to reach an agreement continue to weigh upon prices. The April price of Brent blend futures fell below $13 a barrel on 8 March. This is close to the lowest level for five years.
The only encouraging sign was reports that Iran was having difficulties maintaining production at 3.6 million b/d because of technical and financial problems. Analysts say that Iran will produce well below its quota in March and that Tehran wants a face-saving output reducing agreement in March.