Mexico Cuts Crude Oil Price $1.24

Mexico, the United States’ biggest foreign oil supplier, sharply reduced its crude oil prices in reaction to OPEC’s failure to shore up sagging oil prices worldwide.

The cut by as much as $1.24 a barrel, announced Wednesday night, is expected to put further pressure on an already saturated world oil market. Saudi Arabia reportedly threatened this week to quadruple its production if other members of the Organization of Petroleum Exporting Countries insist on undercutting each other’s prices.

“I wouldn’t be looking for an impact of this at the (gasoline) pump, but it is another significant pressure on world oil markets,” said Paul Mlotok, an oil industry analyst for the New York securities firm of Salomon Brothers Inc.

Venezuela Cut Expected

Mlotok said Mexico’s price cut brings Venezuela, an OPEC member, a step closer to cutting prices and also adds to pressures for price cuts of West Texas intermediate crude oil, the major grade of oil in the United States.

Each $1 cut in the price of a barrel of oil, if adopted by all producers and passed entirely on to consumers, is the equivalent of a reduction of about 2 1/2 cents in the price of a gallon of gasoline.

“Even though prices may still rise because of other reasons--for example, the demand for gasoline in summer is higher than in winter--still, this could help American consumers from paying as high a price as they otherwise would have,” said Trilby Lundberg, editor of the oil industry publication Lundberg Letter.

OPEC Quiet on Change

In Vienna, a spokesman at the OPEC secretariat declined to comment on Mexico’s price changes.

Mexico, the world’s fourth largest oil producer and exporter, is not a member of OPEC but had followed the cartel’s pricing policies until several months ago.

The announcement implied that after the 13-member OPEC failed at a meeting in Vienna this week to agree on defending oil prices, Mexico was now acting on its own.