President Carter yesterday reaffirmed his position that Israel must withdraw from occupied Arab territories as part of an overall peace agreement, and called for Palestinians to be compensated for their losses during decades as displaced persons.

His comments at a news conference were his most detailed remarks on the Middle East since last week's victory of the rightest Likud Party in Israel's election. Carter's statements also came after two days of White House meetings with Crown Prince Fahd and other Leaders of Saudi Arabia.

Saudi leaders, it was learned, informed Carter and other U.S. officials that their oil prices are likely to rise by about 5 per cent by the end of the year to match the levels of other oil-producing states, thus restoring the unity of the Organization of Petroleum Exporting Countries (OPEC).

While Fahd would not confirm this plan in an interview with Arabia is "deeply interested" in restoring OPEC unity. Oil Minister Zaki Yamani told reporters he would not rule out such a price rise.

Fahd said Carter's initiative in meeting Arab and Israeli leaders is "greatly acceptable" in facilitating the search for peace. "I am more convinced than ever before that President Carter does possess the wisdom and the ability to deal with the subject equitable way and of course based on justice," Fahd said.

Carter told his news conference that the Israeli election outcome and the probable coming to power of Manachem Begin, "does create a question" about the chances for peace. But the President said he had already detected some moderation in Begin's views since last week, and expressed the hope that the shift will continue as Begin meets Carter, congressional leaders and American Jews.

The surprise endorsement by Carter of compensation for the Palestinians adds a new element to the Middle East situation. Although Carter said that every U.S. administration of recent years has endorsed "the right of the Palestinians to have a homeland, to be compensated for losses that they have suffered," no documentation could be produced for that claim by executive branch officials.

A White House statement late yesterday said the United States had endorsed a homeland for the Palestinians by approving U.N. General Assembly Resolution 181 in November, 1947, providing for the partition of Palestinians by voting for U.N. General Assembly Resolution 194 in December, 1948.

Israel has rejected resolution 194, which includes a call for displaced Palestinians to be permitted to return to their to their homes and receive compensation for losses or damage to property. However, a number of Israeli political figures have endorsed payments to Palestinians wishing to resettle in other countries.

In recent years the United States has shied away from setting forth its view of the details of a potential Arab-Israeli settlement in the belief that the arguments involved would make diplomacy more difficult.

Carter's discussion of compensation and his reiteration of other elements or a settlement - including Israeli withdrawal from Arab territory - are part of his general effort to place all facets of a potential settlement on the negotiating agenda in the public view, officials said.

However, Carter refused to be specific about his views on the lines of a potential Israeli withdrawal, saying this is something that will have to be negotiated between the parties.

Fahd, in an interview at Blair House, said he is optimistic that a Gevena peace conference can be convened this year despite the new uncertainty arising from the Israeli election.

"In order for the Geneva conference to succeed, it is inevitable that the Palestine Liberation Organization would have to attend," Fahd said. He said the PLO "should" attend in its own capacity, but did not close the door to other types of representation.

Explaining Carter's remarks Wednesday the Fahd wished to reassure Israel about Saudi Arabi's interest in its security, Fahd said he had been speaking in the context of a final settlement including Israeli withdrawal and the return of Palestinians to a homeland.

"Once Israel carries out its side of the bargains, so to speak, of course the Arabs will go along," he said.

Yamani told the reporters in a separate interview that Saudi officials had discussed the Carter plan for a billion barrel petroleum reserve with presidential energy adviser James R. Schlesinger. "The question is whether we would be able to meet your requirements," Yamani said. At another point he said, "This has to be discussed as part of a future meeting. There was a request."

Speaking of the energy projections made public by Carter in connection with his conservation plan, Yamani said, "We agree that unless something very significant is done, the world do nothing we will face a disaster."

Yamani said "there is a fundamental change" between the energy policy of the Ford and Carter administrations. "We feel the present administration is looking for solutions," he said.