Saudis’ Crude Output Said to Exceed Quota : Move Seen As Forcing OPEC Into New Accord

Saudi Arabia boosted its oil output to a peak of 7 million barrels per day in the last week of October in an effort to force OPEC to accept a new production pact, oil industry sources said Tuesday.

Saudi output averaged 5.55 million barrels daily in October, compared to 4.9 million in September and a quota of 4.343 million set by the Organization of Petroleum Exporting Countries, they said.

“Saudi Arabia seems determined to apply the bitter medicine to OPEC until others agree on new output levels,” said one oil industry executive, noting that a glut caused by high OPEC production hurt the kingdom least of all the cartel’s members.

The sources said Saudi Arabia was apparently flooding the market before a meeting of oil ministers from the 13 OPEC countries in Vienna on Nov. 21 to consider a new pact on output and prices.

Low prices have already caused financial hardship to some members, and Middle East benchmark crude Dubai sold in London on Tuesday at $10.50 a 42-gallon barrel, compared to an official OPEC price of $17.42. In New York, West Texas Intermediate, the main grade of American oil, fell 14 cents to $13.44 for oil delivered next month. Prices in the cash market, where actual barrels are traded, fell a similar amount.

Supply Tops Demand

The December heating oil contract closed at 43.17 cents a gallon, up 0.42 cent while December unleaded gasoline futures closed 0.71 cent lower at 53.62 cents a gallon.

Current OPEC output of more than 21 million barrels per day is at least 2 million higher than demand for its oil, sources said. They said the main obstacle to a new pact was Iran’s opposition to demands by Iraq to be allocated an equal quota.

Some executives cautioned that even if OPEC agreed in Vienna to cut output, Saudi Arabia, as the world’s largest oil exporter, might find it difficult to slow production in December.

The sources said a steep rise in Saudi exports was the main reason behind the jump in output to 7 million barrels daily in the last week of October from 5.3 million the previous week.

They said the kingdom’s tanker chartering company Vela had hired about a dozen supertankers to load crude oil in November, mostly for storage, and output would thus be high this month.

Saudi Arabia will also ship about 600,000 barrels of oil to the United States each day in November as part of an agreement with oil giant Texaco to refine and market oil in 23 states.

Saudi strategy since the summer has been to increase output above its OPEC quota as a way of maintaining market share and pressuring other OPEC producers to adhere to quotas, analysts say. The inherent threat in that strategy, they said, is further stepped up production and a possible flooding of the market with oil from swelling inventories.

Huge Saudi Stockpile

The total amount of Saudi oil that has been produced but not sold is more than 100 million barrels, according to one knowledgeable industry source.