Conoco Trims Price of Oil by $1.20 a Barrel : Britain, Soviet Union Reportedly Plan Cuts
Conoco said Friday that it is cutting the price it will pay for the major grade of U.S. crude oil by $1.20 a barrel to $27.05, a move that it said reflects current market conditions.
Meantime, European oil industry sources said Friday that the Soviet Union has offered some customers a $1-a-barrel reduction in the price of its oil and that British National Oil Corp. is expected to cut the price of its oil by $1.40.
Neither the British nor Soviet action could be confirmed, but analysts said such cuts would be in line with recent declines in prices on open markets and would make it harder for the Organization of Petroleum Exporting Countries to maintain its official prices.
Foreign Cuts Expected
A cut of $1 a barrel in oil prices, if adopted by all producers and passed on entirely to consumers, would reduce the price of gasoline and other refined petroleum products by about 2.5 cents a gallon.
Conoco, a unit of Du Pont, said its cut in the price of West Texas Intermediate crude oil would take effect Saturday and was made as part of the company’s monthly review of oil markets.
In May, Conoco posted a price of $28.25 a barrel for West Texas Intermediate.
The foreign price cuts would not be a surprise because both Britain and the Soviet Union tie prices to the spot, or non-contract, market, said Constantine Fliakos, an oil industry analyst at the New York investment firm of Merrill Lynch. But he said the cuts “would be a confirmation of the weakness prevailing in the marketplace.”
He said OPEC is under pressure because oil markets remain sluggish even though the cartel is sticking to its reduced production quotas and its customers’ oil stockpiles remain low.
“This suggests underlying demand is weak,” Fliakos said.
Sanford Margoshes, an analyst at Shearson Lehman Bros., said the Soviet and British cuts would be “following rather than leading” oil markets.
But he added: “What it suggests is that OPEC is in trouble. The downward pressure on prices is very severe.”
Industry sources, who spoke on condition they not be identified, said the Soviet Union, the world’s largest oil producer, offered some customers a reduction in the price of Urals grade oil delivered to European ports to $26 a barrel from $27 a barrel. The Soviet Union, which sells about 1.75 million barrels of oil daily to non-Communist countries, does not make its price decisions public.
Urals crude for June delivery was quoted Friday at $25.90 in the spot market, according to Telerate Energy Service, a private market-information firm.
Industry sources also said that British National Oil is expected to set the price of June supplies of its Brent crude oil from the North Sea at about $26.50 a barrel, close to its average spot market price for much of May. BNOC’s price during May was $27.90.
BNOC said in London that it was aware of the reports but declined to comment. On the spot market Friday, Brent crude for June delivery was quoted at $27.10 a barrel, according to Telerate.