Saudi Arabia yields to OPEC, cuts oil output

January 22, 1992|By New York Times News Service

PARIS -- Yielding to increasing pressure from other OPEC members, Saudi Arabia said yesterday that it would cut oil production by about 100,000 barrels a day.

The reduction by Saudi Arabia, the world's largest exporter of crude, amounts to a modest 1.2 percent of its daily output, but some analysts said that in coming months, in cooperation with other members of the Organization of Petroleum Exporting Countries, the Saudis could make further cuts.

In the last two weeks, Venezuela, Nigeria, Algeria and Libya have each announced reductions ranging from 20,000 to 50,000 barrels a day. Iran is widely expected to cut its output of more than 3 million barrels a day by at least 100,000 barrels, and Indonesia will also announce cuts of about 50,000 barrels a day, said OPEC officials who spoke on the condition of anonymity.

The Saudis' move marks the first time since May 1990 that they have shown a willingness to reduce production with the explicit purpose of lifting oil prices, despite continued pleas and pressures from other OPEC members.

Some OPEC officials said it now appeared that Saudi Arabia might be paving the way, along with other OPEC members, for a much bigger cutback when the group's oil ministers meet Feb. 12 in Geneva.

The OPEC reference price for oil, based on a basket of seven commonly traded types, has dropped below $17 after moving as high as $21 a barrel a year ago. On the New York Mercantile Exchange yesterday, traders expressed disappointment with the size of the Saudi cut by driving down the price for February delivery of higher-grade American crude by 42 cents, to $18.47.

During the last few months, Saudi Arabia has tenaciously refused to yield any of these increases despite a continued fall in oil prices since OPEC's last meeting, in Vienna in November.

"It doesn't make a serious dent in the oil markets," said Peter Gignoux, manager of petroleum trading for Shearson Lehman Brothers in London, reflecting a widespread view among oil analysts that the Saudi move will have little immediate effect on oil prices.

But Mr. Gignoux and other oil experts pointed out that the Saudi decision suggested that "a dialogue within OPEC about reducing oil production has begun." He said the organization would have to face up to the "reality that there is an oversupply by OPEC of about 2 million barrels" a day.

OPEC is currently producing 24.6 million barrels a day. Experts say that is far too much oil, pointing out that slow economies in many industrial countries has reduced demand.

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