Saudi Arabia's oil production surpassed 8.2 million barrels a day last week and is expected to rise to 8.5 million barrels early next year, the highest in a decade, the Saudi oil minister said Saturday.
The rise in Saudi production, along with increases by other members of the Organization of Petroleum Exporting Countries like the United Arab Emirates, Libya, Nigeria and Iran, means that the estimated loss of 4 million barrels a day from Kuwait and Iraq as a result of the U.N. embargo has already been made up.But the significance of the Saudi increase is underlined by the fact that virtually all other major producers within OPEC and outside it, including the Soviet Union, Norway and Britain, have in the view of oil experts reached the limits of their capacity.
Coupled with a drop in consumption of about 1 million barrels a day because of high prices, these developments mean that despite the embargo on Kuwaiti and Iraqi oil, the world supply may be a little more than it was before the Persian Gulf crisis began in August.
The oil experts said that unless war broke out in the gulf, the additional flow of Saudi oil would by February push prices significantly below their present level of $34 a barrel.
This will presumably result in a drop in the retail prices of gasoline and home heating oil.
These specialists maintain that prices are now so high only because a fear of shortages has produced "a psychological premium."
Saudi and American officials also expressed confidence that even in the case of war, Iraq would not be able to stop Saudi oil exports, noting that it had failed to halt Iranian exports during eight years of war despite daily bombardment of Iran's oil installations.
The Saudi output is 57 percent higher than the 5.4 million barrels a day it was pumping before the Iraqi invasion.
With this increase, oil experts say,OPEC oil production will stand at 23.3 million barrels a day by February. Before the crisis, oil experts anticipated that the world would need 24.2 million barrels a day from OPEC this winter.
Saudi oil executives said the country planned to increase its output above the 8.5 million barrels a day expected early next year.
But they said any further rise would take much longer and would require substantial capital spending and construction work to upgrade the existing network of pumps, plants and pipelines.
Saudi oil industry officials agreed with an assessment by the American military commander in the region, Gen. H. Norman Schwarzkopf, last week that Iraq has limited ability to damage Saudi oil exports.
"You've got to remember that during eight years of war with Iran, despite almost daily bombardment by the unchallenged Iraqi air force of all Iranian oil export stations, pipelines, tankers and oilfields, the Iraqis failed to stop Iranian oil exports for a single week," a senior official of the Saudi Petroleum Ministry said.
Schwarzkopf said that U.S. and Saudi air defenses would make it virtually impossible for Iraqi missiles or the Iraqi air force to cause more than marginal damage to Saudi oil export installations.