More U.S. oil companies slashed their posted prices for high-quality domestic crude by up to $1.50 a barrel yesterday as Energy Secretary Donald Hodel telexed messages to the industry that OPEC was attempting to set artificially high oil prices.
In apparent U.S. government support for the spreading price cuts, Hodel sent the oil companies' a statement he issued Wednesday after OPEC agreed to reduce production in a bid to prop up shaky world oil prices.
OPEC's attempt "to manipulate the market by setting artificially high prices or by seeking to fashion arbitrary restrictions on production is not in the interests of U.S. or other consumers or, in the long run of, producers," the Hodel statement said.
But Mexico, America's largest foreign oil supplier, said it will hold the line on its crude prices and cut back oil exports by 100,000 barrels a day for at least a month to help OPEC defend its $29-a-barrel base price.
OPEC's $29 price -- the benchmark for light crudes around the world -- came under pressure after Norway, Britain and OPEC member Nigeria lowered their light oil prices earlier this month.
Conoco Inc., Marathon Oil Co., Shell Oil Co. and Crown Central Petroleum cut their posted prices for a variety of light crudes produced in the United States by between 75 cents and $1.50 a barrel. Other companies trimmed prices earlier in the week.
Crown Central, a small independent, reduced the price it will pay for West Texas intermediate -- the most important U.S. crude -- by 75 cents to $28.75 a barrel. Mobil dropped its posted price for this key crude last week.
"These cuts in domestic postings are just another another domino in the whole pricing chain," said William Randol of First Boston Corp.
Analysts expect oil prices to slip further until OPEC narrows price differentials between overpriced light crude and cheaper heavy crudes, which are in greater demand because refiners have upgraded their facilities to process this bargain oil into gasoline and other products.
The Organization of Petroleum Exporting Countries predicted its decision to cut output by 1.5 million barrels a day Nov. 1 would immediately bolster spot oil prices, but the 13-nation group postponed any action on price differentials.
Spot prices for crude sold to the highest bidder in the U.S. market rose about 25 cents a barrel yesterday and inched up about 5 cents overseas in tentative trading, said Jay Amberg of the Oil Buyers Guide International in Lakewood, N.J.
"Nobody is really sure of the price direction," he said. "The jury is still out on the OPEC decision."