The Soviet Union, the world’s largest oil producer, has informed customers that the price of its major grade of exported oil will be increased by 40 cents to 50 cents a barrel as of next week, European oil industry sources said Monday.
It will be the fourth price increase in a month, following a 50cent jump in mid-August and two later increases of 25 cents each.
But analysts said they did not believe the higher prices could be sustained because world demand for oil remained below anticipated levels of supplies.
The latest Soviet increase, effective next Monday, will raise the price of a delivered barrel of Urals grade crude to $26.90 to some Soviet customers and to $27 to others, from the $26.50 level that has prevailed since Sept. 6, the sources said.
The difference in prices was not explained. In the past, however, the Soviet Union has imposed small price differentials for specific companies based on the volume of oil sold to those customers. The Soviet’s largest oil customers outside the communist bloc are in Europe and India.
Sources at companies that are customers of the Soviet Union said they had been notified of the latest increase by either telex messages or telephone calls. The sources spoke on condition they not be identified because of the sensitive nature of their international dealings.
The Soviet Union has been setting prices closely in line with the open market and does not formally announce price changes.
Philip Verlerger Jr… A Washington analyst who follows oil markets for the consulting firm Charles River Associates, said another Soviet price increase would not be a surprise because “they’re market driven probably more than anyone else.”
He said the Soviets appeared to be “responding to a temporary tightness in world oil.”
Although world oil prices are lower than last year’s levels, markets stabilized in August because members of the Organization of Petroleum Exporting Countries held down production and supplies of oil outside contracted markets have become scarcer. OPEC is scheduled to meet Oct. 3, however, to consider requests from some of its members to increase their production quotas.
In addition, Saudi Arabia, which has helped OPEC meet its quotas by holding its own production to a 20year low, has repeatedly said it no longer act in that capacity.
The three previous Soviet price increases came at a time when oil markets were rebounding from a steep slump and Urals crude already was trading at a higher price.
On the spot market Monday, Urals crude oil was quoted at $26.80 a barrel, below the new price, according to Telerate Energy Service, a private market information firm.
Some traders said the Soviets, who depend heavily on crude oil exports for hard currency, appeared to be grasping “for every cent they can get” because of a belief in oil markets that recent price gains may not be sustained.
Article extracted from this publication >> September 13, 1985