Energy Secretary James R. Schlesinger said yesterday that Saudi Arabia, the world's leading oil exporter, is reducing its production, which could further tighten world oil markets and add some upward pressure on prices.
The Saudis "are now engaged in cutting back production to 8.5 million barrels a day," Schlesinger told a House Appropriations subcommittee.
Saudi Arabia, leading oil producer in the Organization of Petroleum Exporting Countries (OPEC), produced up to 10.5 million barrels of oil a day in January, but has reduced production since then.
Energy Department officials said the reduction is expected to cut the Saudis' average production during the second quarter to 8.5 million barrels a day, down 1 million from March production levels.
While the reduction will take some slack out of the world oil market, it will not result in significant added spot shortages, officials said.
Saudi Oil Minister Sheik Zaki Yaman has said repeatedly that Saudi Arabia would reduce production as soon as Iran restored its oil exports. Iranian exports which were shut down totally during January and part of February, rose to 2.7 million barrels of oil a day last week and more then 3 million yesterday, according to DOE officials.
Yesterday a senior administration official said, "The Saudi government has made its views on production cuts known to Aramco." The Arabian American Oil Co., a consortium made up of Exxon, Mobil, Standard Oil of Calif. and Texaco, produces the bulk of the Saudis' oil.
James V. Knight, Aramco's Washington vice president, said last night that he could not verify Schlesinger's comments on a cut in production, adding that the Saudis, rather than Aramco, will make their intentions public.
Schlesinger's comments, made in an exchange with Interior subcommittee member Norman D. Dicks (D-Wash.), came on the heels of a Reuter report from Bahrain that the Saudi deputy minister of petroleum said the kingdom will reduce oil production soon.
The Saudis' move to reduce production comes as relations between Riyadh and Washington are more strained than they have been for years. Some powerful members of the royal family such as Prince Sultan, Prince Naif and Foreign Minister Prince Saud are said to have put increasing pressure on Crown Prince Fahd to separate the kingdom's policies from U.S. demands. These views-based in part on dissatisfaction with the U.S.-designed Israeli-Egyptian peace accords-are matched by those of many young, Western-educated technocrats in the Saudi cabinet.
Riyadh's cut in oil production runs counter to urging from Ambassador John West to have the Saudis continue production at a high level until world oil markets recover from Iran's revolution.
In another move that could affect oil prices, Saudi Arabia, Iraq and other Persian Gulf nations have called on the major oil companies to boycott Egypt's Sumed Pipeline, which carries oil from the Gulf region to the Mediterranean. The report, published in Middle East Economic Survey, also says that the Arab producers have called on the oil companies not to move oil through the Suez Canal.
The actions could slightly reduce Egyptian revenues and raise oil shipping costs for consumer nations.
Schlesinger and President Carter made vigorous appeals again yesterday for Congress to enact the administration's proposed windfall profits tax on the added revenues that U.S. oil companies will earn from the decontrol of domestic oil prices.
Carter made his appeal to 38 Democratic House freshmen at a White House breakfast.
On Capitol Hill, Schlesinger said the tax is necessary, but "there is no necessity for a plowback" of the tax to the industry, which the companies have urged. The Energy secretary also said "a sample of opinion on Capitol Hill has shown virtually no chance for extension [of controls]."
Last night, Senate Energy Committee Chairman Henry M. Jackson (D-Wash.) said that he will make public today a proposal to extend oil price controls beyond September 1981, when they expire under current law.