Adds to Pressure on OPEC : Conoco Drops Price on Key Crude Oil
Conoco cut the price Friday that it will pay for a key domestic crude oil by 30 cents a barrel and intensified pressure on OPEC to reduce oil prices at its summit next week.
Observers said the Organization of Petroleum Exporting Countries hoped to avert another price drop by lowering its 16.5-million-barrel-a-day production ceiling.
But analysts expect bitter wrangling to erupt at OPEC’s summer meeting in Vienna on July 5 if the 13 member nations attempt to divide a shrinking market.
Several OPEC states are openly exceeding their output quotas, and Ecuador, the cartel’s smallest member, has vowed that it will continue to overproduce.
Observers estimate that current demand for OPEC oil is only about 14.5 million barrels a day--well below the official production ceiling--in face of stiff competition from independent producers.
In the past month, Britain, Norway, Mexico and the Soviet Union have dropped their oil prices.
The state-owned British National Oil Corp. dropped its price for June deliveries by $1.25 to $26.65 a barrel for North Sea Brent, the most widely traded North Sea crude. That made OPEC oil, which averages $27 a barrel, overpriced in the world market. The posted price of the benchmark OPEC crude, Saudi Light, is $28.
OPEC oil ministers from Algeria, Venezuela, Kuwait and Nigeria were expected to meet today in Algeria and then go to Libya on Sunday for further talks on the world oil market as a prelude to the Vienna summit. The OPEC ministers will be joined by Mexico’s energy minister.
Algeria is adamantly opposed to another OPEC price cut. OPEC reduced prices for the first time in its history by $5 a barrel in March, 1983, and then shaved off an additional $1 a barrel in January.
Conoco is one of the most aggressive of the large U.S. oil companies on crude pricing. It said it is trimming its buying price for West Texas Intermediate--the nation’s benchmark crude--by 30 cents to $26.75 a barrel July 1.
That cut is much smaller than the $1.20-a-barrel cut made by Conoco last month.
Crude oil prices on the New York Mercantile Exchange fell Friday as traders reacted to the news.
The price of crude oil for August delivery fell 22 cents to $26.87 a barrel, while the price for September delivery fell 23 cents to $26.36. The October delivery price fell 20 cents to $26.
Other major oil companies maintain a price of $28 a barrel for West Texas intermediate.
With this price cut, Conoco’s posted price for West Texas Intermediate has dropped $1.50 since May 1. Conoco’s posted price in May was $28.25.
Domestic crude prices are determined by how much the buyer is willing to pay at the wellhead as the oil comes out of the ground.