Price Paid for North Sea Oil Cut by Britain
Britain lowered the price that it is willing to pay suppliers for North Sea oil by $1.25 a barrel Wednesday. Analysts said the move increases the odds of price cuts by other producers, including OPEC.
The government-run British National Oil Corp. said it had reduced the price that it will pay for Brent and Forties crude oils from the North Sea to $26.65 a barrel in June from $27.90 in May. It also reduced the price of Ninian oil to $26.50 from $27.75 a barrel.
As recently as last October, BNOC was paying $30 a barrel to suppliers for Brent crude. But the latest cut was not a surprise because the trading company has tied its prices more closely to levels in the spot, or non-contract, market in recent months, and those prices have been falling since April.
A cut of $1.25 a barrel, if adopted by all producers and passed on entirely to consumers, is equivalent to a reduction of about 3 cents a gallon on the price of gasoline and other refined petroleum products.
Pound Driven Down
Expectations of falling oil prices helped push the British pound lower against the U.S. dollar for a second straight day, bringing sterling to $1.2565 and widening its losses since late Monday to nearly 4 cents.
Britain’s price cut came two days after nine oil ministers of the 13-member Organization of Petroleum Exporting Countries decided to move forward the next semiannual meeting of the cartel to June 30 from July 22 to discuss weak oil markets and reported cheating by members on OPEC’s price and production limits.
The News Agency of Nigeria quoted Alex Nwokedi, public affairs manager of Nigerian National Petroleum and a member of the Nigerian delegation, as saying that OPEC would wage a “price war” against any members that continued to violate the cartel’s price and production quotas.
Nigeria, an OPEC member that competes directly with non-member Britain for sale of light crude oil, has in the past broken ranks with the cartel to follow price cuts for North Sea oil.
In 1983, when Nigeria unilaterally cut its prices following British cuts, OPEC later reduced its official prices, dropping Arabian Light oil to $29 a barrel from $34. Last fall Nigeria again cut prices in response to cuts by non-members Britain and Norway, and, in January, OPEC lowered Arabian Light to $28 a barrel.
Nigerian Bonny Light oil currently has an official price of $28.65 a barrel, $2 more than Britain’s new price. In the spot market, Bonny Light was quoted Wednesday at $26.95.