DECLINE IN U.S. DOLLAR MAY BOOST OPEC OIL PRICE
The sliding value of the U.S. dollar
may soon force the Organization of Petroleum Exporting
Countries to raise its oil benchmark price, setting the stage
for prices as high as 22 dlrs a barrel by yearend, top
executives with U.S. oil companies said.
    The current benchmark price of 18 dlrs a barrel was
established by the Organization of Petroleum Exporting
Countries (OPEC) at its December meeting when the cartel set a
15.8 mln barrel per day production ceiling.
    But the continuing weakness of the U.S. dollar, the
currency used by OPEC for its oil sales, is making the 18 dlr
price difficult to sustain, said Fred Hartley, chairman of
Unocal Corp <UCL>.
    The U.S. dollar has fallen in value by about 10 pct since
December and has fallen by a total of about 40 pct during the
past two years.
    Hartley told Reuters he expected significantly higher oil
prices this winter and would not rule out the potential for 25
dlrs a barrel by the spring of 1988.
    "I think June will be the critical month to see what they
do," said Hartley, who was in Houston to attend the World
Petroleum Congress. OPEC has scheduled a regular meeting in
June which some experts believe is likely to revive suggestions
that oil should be priced according to a basket of world
currencies instead of the U.S. dollar.
    E.H. Clark, chairman of <Baker Hughes Inc>, said the Saudi
kingdom's need to generate revenues -- rather than greater
world demand -- would drive any price increases.
    "The Saudis have made committments and have a balance of
trade based on receiving 18 dlrs a barrel for this oil. But the
U.S. dollar won't buy as much as it did five or six months
ago," Clark said in an interview. "I'm betting on the Saudi
king's need to sustain revenues."
    Clark predicted that world oil prices would top 22 dlrs a
barrel by January one.
    However, the authoritative Middle East Economic Survey
reported yesterday that Saudi Arabia would not seek to increase
OPEC oil prices unless oil demand showed strong growth.
    Saudi sources told the newsletter that the policy was based
on the longterm need to restore the competitive position of
OPEC oil against other energy sources.
    Many oil industry experts are forecasting a modest increase
in world oil demand averaging one pct annually during the next
few years.
    Michel Moreau, a director of the <Elf Aquitaine Group>,
said he believed the worldwide oil industry had reached a
consensus that prices of at least 20 dlrs a barrel were
necessary to cover exploration costs, royalties and taxes on
new production.
    The 20 dlr level will be reached this year only if the
cash-strapped nations of Nigeria, Egypt and Gabon refrain from
discounting oil prices or increasing production levels, Moreau
said.
    "I think if more than two (OPEC nations) defect, the
production agreement will fall apart," he said. "But this
threat is the Saudis' big stick to keep producers in line.
Nobody wants a repeat of the collapse that occurred in 1986."
    Lawrence Rawl, chairman of Exxon Corp <XON>, told Reuters
he expected prices would remain at 18 dlrs through the end of
1987, adding that 20 dlrs a barrel was a possibility.
    Other major companies are taking a more cautious view of
prices, fearing that some OPEC members may yet upset the
cartel's production agreement.
    "This is a year of testing," said Alfred Munk, manager of
foreign affairs at Amoco Corp. (AN). "If they fail, there may
be a price decline to about 14 dlrs a barrel."
    French-owned Total CFP's vice president Pierre Vaillaud
said, "Demand is not going up very quickly, at best maybe one
percent a year. You can't change the price with just one pct,"
Vaillaud said.
 Reuter
