Norway lent a modicum of support Wednesday to the Organization of Petroleum Exporting Countries by announcing plans to cut oil exports temporarily, a step expected to give a more psychological than real boost to oil prices.
In fact, higher-than-expected U.S. inventories of gasoline and other refined oil products dwarfed the news from Norway, and the price of crude oil futures contracts fell 30 cents to $14.88 per barrel on the New York Mercantile Exchange.
Norway's response to the cartel's pleas to trim the worldwide glut of crude oil had been awaited eagerly as an important indicator of how much support OPEC can muster in its effort to shore up oil prices.
The 13-nation cartel implemented its own temporary production cutting quota on Sept. 1, announcing its intentions to reduce output by about 20% to 16.8 million barrels a day. It has been urging such major non-OPEC producers as Norway and Britain to follow suit.
Viewed as a Compromise
But Norway's response--cutting exports by 10% for October and November rather than reducing production--was viewed as a compromise that in itself would only temporarily withhold about 90,000 barrels a day from the market and have little impact on world supplies.
By pumping and then storing the 90,000 barrels instead of actually cutting production by that amount, Norway avoids alienating oil companies and the British, with whom it shares production from some North Sea oil fields. After Norway's announcement by the Norwegian government, Britain reiterated its opposition to production cuts.
"That's not a lot of oil," said Stephen Smith, a vice president at Data Resources in Cambridge, Mass. "It's really a token gesture. And all they're doing is deferring dumping it in the market."
A spokesman for Norway's oil and energy ministry said the action was "based on the desire to stabilize the price of oil at a higher level." He conceded that the step "means very little or nothing to the market but may have some psychological effects."
China, saying it supported OPEC's goals of higher oil prices, said it would trim its oil exports by 14 million barrels over the second half of the year--a 10% to 12% reduction of about 77,000 barrels a day from recent export levels thought to be about 700,000 barrels a day. China said it had already cut production by that amount during the first half of the year, so it wasn't clear whether anything is changed by Wednesday's announcement.
Earlier, the Soviet Union said it would withhold about 100,000 barrels per day from world markets in support of OPEC. Mexico, Egypt and Malaysia have also pledged varying degrees of restraint.
However, analysts said those promises taken together have smaller implications for the oil glut than such factors as the success of Iraq's bombing raids in its war with Iran, where about 500,000 barrels of Iran's current production of 2.1 million barrels per day are considered at risk.
The severity of the world oversupply was underscored by the latest statistics from the American Petroleum Institute, an industry-funded organization, which showed U.S. inventories of refined products to be 1.9 million barrels per day above year-earlier levels.
"That's way above what was expected," said futures trader Peter C. Beutel of Elders Futures in New York. "The increase in demand is not brisk enough to absorb all that."
Wednesday's modest decline in the price offered for October deliveries of crude oil contrasted with the climb in prices since Aug. 5, when OPEC announced its two-month agreement to cut production. Prices have climbed from the $10 to $12 range to about $15 for a 42-gallon barrel of West Texas Intermediate crude.