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By Elizabeth Pisani
461 words
17 October 1990
Reuters News
(c) 1990 Reuters Limited

JAKARTA, Oct 17, Reuter - OPEC, warning of world recession unless industrial countries act to cut soaring oil prices, appeared on Wednesday to have thawed its relations with the West.

The oil production cartel's secretary-general Subroto said informal discussions with a senior member of the West's energy watchdog, the International Energy Agency (IEA), had created a better understanding between the two oil bodies.

"There have been exchanges on a personal level. We have had a chance to discuss if and when a formal IEA/OPEC meeting were to come about what the objective would be," he told an energy conference.

Four OPEC ministers -- from Indonesia, Algeria, Venezuela and Nigeria -- as well as Subroto and Paul Vlaanderen, who heads the IEA department for relations with non-member producer and consumer countries, have been speaking at the conference.

"So far the IEA has always thought if producers and consumers sit together the producers will insist on fixing a price. That is not the intention," he said.

"The idea is to have a better understanding of each other's plans, wishes and demands. We will get a kind of transparency so we won't get caught by surprises," Subroto said.

Oil prices have nearly doubled to approach 40 dollars a barrel since Iraq's invasion of Kuwait on August 2, prompting fears of an imminent recession in the world's economy.

OPEC (Organisation of Petroleum Exporting Countries) says the increase in output by its members to replace lost oil from Kuwait and Iraq is as much as they can do and now industrial countries must do their bit.

That, it says, can be done if the West releases some of its huge oil stockpiles onto the market to end speculation.

The IEA estimates its members have squirrelled away 95 days worth of oil stocks, 67 of them in the hands of companies and the rest as emergency supplies with governments.

The IEA's Vlaanderen, representing the group's executive director Helga Steeg, said commercial stocks by the end of winter would have fallen to 65 days which "is relatively low but neither abnormal nor unmanageable."

The agency was ready to act if there were further drops in oil supplies but he said as things stood now it would not help.

"The current strains on the oil system are unlikely to be remedied by a simple drawdown of IEA strategic stocks. Physical shortages do not explain present price fluctuations," he said.

But the IEA had received signals that oil companies would be prepared to release stocks.

He would not comment on a Venezuelan proposal for a United Nations-backed conference between producers and consumers until the IEA governing board had met.


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