Oil traded on world markets seesawed Friday as Saudi Arabia's King Fahd, the only OPEC head of state to publicly advocate an $18-a-barrel target, called for stable prices.
Oil prices hovered in the $16-a-barrel range in nervous trading after plummeting during the first three days of the week and rebounding somewhat on Thursday.
On Dec. 20, OPEC agreed to a Saudi proposal to limit production by 7.5% to 15.8 million barrels a day for the first half of 1987 in a bid to boost oil prices to an official average of $18 a barrel from the $15 level.
Oil prices shot up to the $19-a-barrel mark in mid-January and then began to erode as reports surfaced that the Organization of Petroleum Exporting Countries was exceeding its new production limit because Iraq, Kuwait, the United Arab Emirates and Ecuador refused to honor their output quotas.
Fahd, in an interview with the London-based Lebanese magazine Al-Hawadess, said: "Oil prices must remain stable as much as possible."
The Saudi monarch described oil as "a strategic commodity that concerns the entire world."
Donald Fernow, an analyst at Thomson McKinnon Securities Inc. in New York, said he believes the oil market "is pretty close to a bottom now because there is too much at stake" for Saudi Arabia, OPEC's largest producer.
"King Fahd has put himself on the spot as the only head of state to come forward and call for an OPEC pricing policy based on $18 a barrel," Fernow said. "The Saudis are the key producer within OPEC, and their production, which already has declined, will be trimmed back further."
Industry sources estimated that Saudi production dropped below the 3 million barrel-a-day level last week, compared with its OPEC-assigned quota of 4.13 million barrels a day.
Some large oil companies have balked at paying fixed prices for OPEC oil, intensifying pressure on cartel members to offer discounts and overproduce to make up lost revenue.
Industry reports said Britain--the target of the Saudi-led pricing war that drove down oil to $8 a barrel last summer--boosted production to 2.65 million barrels a day in January, the highest level since the opening 1986 quarter. Britain is not a member of OPEC.
On the European spot market, where oil is sold to the highest bidder, Britain's North Sea Brent crude was unchanged at $16.20 a barrel. It dropped to the $15 range Wednesday for the first time since OPEC agreement was unveiled. The United Arab Emirate's Dubai Light--an important OPEC crude--lost a 5 cents to $16.35 a barrel.
West Texas Crude Falls
On the New York Mercantile Exchange, West Texas Intermediate--the benchmark U.S. crude for immediate delivery--fell 18 cents to $16.60 a barrel.
But West Texas Intermediate rose 15 cents to $16.75 a barrel on the U.S. Gulf Coast market.
"The market swayed back and forth, but there is no consensus how far down it can go," said Richard Marose, analyst at Stotler & Co. in Chicago. "Some traders think there's not much more room on the downside, while others expect prices to fall to $13 a barrel."
Conoco Inc., the U.S. oil industry's bellwether on pricing, lowered the price it will pay for West Texas intermediate by $1 to $16.50 a barrel. Several smaller refiners cut their posted price to $16 a barrel earlier this week.
Home-heating oil for March delivery on the Merc tumbled by 1.34 cents to 43.41 cents a gallon and unleaded gasoline eased 0.71 cent to 46.80 cents. There is a U.S. surplus of both fuels.