232. Telegram From the Department of State to Selected Diplomatic Posts1
228164. Subject: Crude Oil Spot Market Sales.
1. Entire text Confidential.
2. At the Tokyo Summit, participants pledged that they would “urge oil companies and oil-exporting countries to moderate spot market transactions.” That same week, at the June 26 OPEC meeting, OPEC Ministers agreed “that member countries would take steps to limit transactions in the spot market in a collective effort to stop the present price spiral.” Two months later, cargoes of crude oil are being offered and sold in the spot market at prices between $30 and $35 per barrel. The Department is concerned at reports that larger volumes of crude oil are now being offered for spot sales, and at the increasing evidence that producer governments themselves are diverting production from contract sales to the spot market.
3. Posts in OPEC capitals should, at their discretion, raise this matter with appropriate host government officials to emphasize importance USG places on dampening spot market activity and urge that they follow through on the OPEC commitment. (Department understands the difficulty in contacting appropriate level officials in Moslem countries during the next week;2 thus posts may delay approach until these officials are available.) For Jidda: You should inform SAG that we are making this approach in other OPEC capitals, and that we hope it will complement Saudi efforts to minimize quantities of OPEC crude traded on the spot market.
4. Posts in Summit capitals should inform appropriate officials that USG is making this approach in key OPEC capitals.
5. Posts may draw upon the following points:
—The USG welcomed OPEC’s commitment to limit transactions in the spot market, and the United States together with other major industrial oil consumers pledged at the Tokyo Economic Summit to moderate participation by their oil companies in the spot market.
[Page 741]—We are very disturbed that spot sales of crude oil continue to take place in the $30 to $35 range, and at reports that growing quantities of crude oil are now being offered for sale on the spot market.
—Instability in the world oil market, as evidenced by abnormally large quantities or abnormally high prices in the spot market, benefits neither oil producers nor consumers in the long run, as shown by the dramatic coincidence of views on this topic in Tokyo and Geneva last June.
—The U.S. Government takes seriously its commitment at the Tokyo Summit to moderate spot market transactions, and is fully prepared to do its share.
6. For posts in other IEA capitals: This message for your info only at this time.
- Source: National Archives, RG 59, Central Foreign Policy Files, D790396–0559. Confidential. Drafted by Todd; cleared by Katz, Calingaert, Rosen, and Twinam and in DOE/IA, EA/J, EUR/RPE, AF/W, and ARA/AND; and approved by Cooper. Sent to all OECD capitals, USOECD Paris, USEEC Brussels, Jidda, Kuwait, Tripoli, Baghdad, Abu Dhabi, Algiers, Doha, Tehran, Caracas, Lagos, Jakarta, Libreville, Quito, Helsinki, Lisbon, Reykjavik, and Belgrade.↩
- Muslims observed the holy month of Ramadan in August of that year.↩