Saudis Boost Supply of Oil to Pre-Crisis Level

Saudi Arabia’s oil production surpassed 8.2 million barrels a day this week and is expected to reach 8.5 million barrels by early next year, the highest in nine years, the New York Times reported Sunday.

Saudi Oil Minister Hisham Nazer was quoted as saying that production since the Aug. 2 Iraqi invasion of Kuwait has been higher than previous official estimates.

The rise in production, along with increases by other members of the Organization of Petroleum Exporting Countries, reportedly has made up for the loss to the world market of 4 million barrels a day from Kuwait and Iraq. A United Nations embargo has prevented those countries’ oil from being sold overseas.

The Saudi production increase and a drop in consumption of about 1 million barrels a day because of higher prices means that, despite the embargo on Kuwaiti and Iraqi oil, the world supply may be a little larger than before the Persian Gulf crisis began in August.

Separately, the Lundberg Survey said gasoline prices in the United States declined over the last two weeks for the first time since the crisis began. The average price for all grades of gasoline fell .18 cents to 146.91 cents per gallon.

Average prices at self-service stations were 136.10 cents per gallon for regular unleaded, 152.42 for premium unleaded and 132.64 for regular leaded. Averages at full-service stations were 157.77 cents for regular unleaded, 171.34 for premium unleaded and 154.08 for regular unleaded.

The New York Times quoted industry experts as saying that unless war broke out in the Gulf, the additional Saudi oil would send crude prices significantly below their present level of $34 a barrel by February, which should lead to a drop in retail prices of gasoline and heating oil.

Fears of a shortage, rather than an actual shortage, seem to have driven crude prices up, creating what experts called “a psychological premium.”

Saudi and American officials expressed confidence that Iraq would not be able to stop Saudi oil exports if a war broke out, especially in view of the fact that it was unable to halt Iranian exports in eight years of war, despite daily bombardment of Iran’s oil installations.

The increase in Saudi production reportedly came much faster than expected. If production reaches 8.5 million barrels a day by February, the country will be producing 57% more oil than before the crisis.