Reviving Old Oil Questions
A sentence in Hobart Rowen's column in the Sunday Business section should have read: "According to (oil expert Eliyahu) Kanovsky, the Saudis won't wait until their monetary reserves are totally exhausted before raising oil production." (Published 7/13/87)</br></br>Since OPEC announced last August that it intended to resume its old tactic of holding back oil production, prices have staged a solid recovery, jumping to $21 per barrel on a spot market basis here from less than $10 per barrel at the low point just a year ago.</br></br>At that time, the now-deposed Saudi oil minister, Sheik Zaki Yamani, was counseling a strategy of flooding the markets with Middle East oil, his theory being that non-OPEC producers would be forced out of business and that, ultimately, OPEC could resume monopoly-based higher pricing.</br></br>It didn't work, whereupon Yamani was fired. OPEC members then set a price target of $18 a barrel, cut their output about 20 percent in the final months of last year, and agreed on a further 7 percent reduction for the first quarter of 1987, with a ceiling of 15.8 million barrels a day.</br></br>According to Morgan Guaranty Trust Co., the cartel members overall kept surprisingly close to their agreed quotas. Notably, the Saudis came in under quota in February and March, offsetting excess production by Iraq and some others.