Saudi High-Output Plan Worries Others in OPEC

Saudi Arabia will keep its oil production high, even if Kuwait and Iraq resume large-scale exports, industry sources said Monday.

Such a move would keep oil prices depressed, spelling trouble for producers. But for motorists, it could mean even cheaper gasoline prices.

Gasoline is selling in the United States at its lowest levels in nearly 50 years after adjustments for inflation, industry analysts say.

“Saudi output is 95% certain to average 8 million barrels per day or above next year,” said one source, well-versed in Riyadh’s oil policy.

The kingdom, the world’s largest oil exporter, produced 8.5 million barrels a day in October and plans to keep close to this level in the first quarter of next year.

“I think that’s already been determined. The outlook is for 8.2 to 8.5 million through the winter,” said a source in Dhahran, home of the state oil firm Saudi Aramco.

The next meeting of the Organization of Petroleum Exporting Countries on Nov. 26 will almost certainly extend an agreement that set a ceiling of 23.65 million barrels a day for the fourth quarter, the sources said.

But Saudi production plans for the second and third quarters of 1992 are causing more concern among other OPEC countries.

One Gulf industry source said some ministers were too alarmist about the possibility of a sharp drop in oil prices. Only a relatively small cut in OPEC output of 500,000 to 1 million barrels a day would be needed in the second quarter, he said.

The possibility of a price collapse stems from forecasts that demand could fall by 2.5 million barrels a day after the winter months, when demand slackens.

OPEC is less optimistic about the world’s appetite for its oil. The cartel conducted a survey recently that found demand for OPEC oil will fall to 23.5 million barrels a day in the last three months of this year, down from a previous estimate of 23.9 million.

The effects for OPEC would be accentuated by any return of Iraqi oil to the world market and the continued recovery of Kuwaiti production.

But a Gulf source said a return to the market by Iraq will probably be slow and that production will be on a small scale.

For consumers, a depressed oil market would mean lower gasoline prices.

Analysts said gasoline are the lowest since the 1940s at $1.10 to $1.15 a gallon for self-serve, unleaded regular gasoline.

Oil demand will certainly fall in midyear but would still be high enough to keep OPEC running close to capacity, even assuming flat economic growth and a halt to the decline in Soviet oil production, an industry source said.