TNAG-1313-FCO40-1688-Future-of-Hong-Kong-views-and-involvement-of-Australia--Cana-1984 — Page 99

CONFIDENTIAL

SECRETARY OF STATE'S MEETING WITH HIGH COMMISSIONERS,

WEDNESDAY 21 NOVEMBER 1984

OIL PRICES

Essential facts

1.

At the beginning of October Saudi Arabia altered the

proportion of light crude in its export blend in favour of

increased volumes of medium and heavy: this amounted to a

price cut of about 50 cents a barrel. In the second week in

October the UAE was reported to be on the brink of announcing a price reduction. On 15 October the Norwegian state oil

company, Statoil, offered discounts of $1.35 to its customers

for the month of October. On 17 October BNOC therefore

proposed to reduce its prices too (the Brent marker going down from $30 per barrel to $28.65): had it not done so, it might

well have lost all its term customers.

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2. OPEC reaction was relatively restrained, though unfavourable.

Only the Nigerians whose crude sells into the same markets as

BNOC's were prompted to respond, reducing the price of their

principal light crudes by $2. There have been reports that

they may now be considering a two-stage increase. On 31 October

OPEC agreed to reduce overall production from 17.5 mbd to 16 mbd

on a temporary basis to protect the present price structurę,

with only Nigeria and Iraq exempted from cuts. The problem of

price differentials will be tackled at an OPEC meeting in

December.

3.

Of Commonwealth countries apart from the UK, only Nigeria

is a significant oil exporter (and OPEC member). Many Common- wealth countries would probably like lower oil prices and may be critical of the Government's attempts in August to keep prices up.

Energy, Science and Space Department

14 November 1984

CONFIDENTIAL