Britain and Norway cut the price of North Sea oil by $3 a barrel yesterday in what many specialists viewed as the first round of an expected widespread lowering of world petroleum prices.
Nigeria, whose oil competes directly with North Sea crude, informed buyers that it would cut its prices within the next few days to about the same levels as Britain and Norway, news agencies reported. Such a unilateral cut by Nigeria would be a major break with the rest of the Organization of Petroleum Exporting Countries, and Kuwait warned that members who cut prices risk being excluded from OPEC discussions.
Britain's state oil company proposed to lower its price to $30.50 a barrel, while Norway went down to about the same level. The cuts, whose size might be changed slightly in negotiations with buyers, were the first by major oil exporters since a sharply divided OPEC meeting on Jan. 23-24 failed to agree on a package of production ceilings to dry up the world oil glut.
The North Sea reductions were not expected to have much direct impact on U.S. gasoline and heating oil prices, although an OPEC-wide decline might shave off a few pennies a gallon at the pump. The North Sea and Nigeria together supply only about 7 percent of U.S. oil consumption, according to Energy Department figures, and companies had anticipated the reductions and discounted accordingly.
In a further sign that oil prices are weakening, major U.S. refiners this week trimmed $1 a barrel off the price that they pay for domestic crude. U.S. purchases of Nigerian oil have declined substantially during the past two years as the United States began to rely more on domestic and Mexican crude.
The attention of world oil markets now switches to Saudi Arabia and its OPEC allies in the Persian Gulf, who have indicated that a price cut is likely but want an OPEC-wide agreement to avoid a price-cutting war. The six-nation Gulf Cooperation Council--which includes OPEC members Saudi Arabia, Kuwait, the United Arab Emirates and Qatar, as well as non-members Bahrain and Oman--meets today and is expected to consider its next move.
The Saudi-led group might decide that it can avert a price cut after all, according to industry executives and U.S. officials who follow oil markets. Demand for oil may begin to pick up soon because companies' inventories are running low and a U.S. economic recovery seems to be on the way, they said.
But most sources said that they expected that the gulf states will have to follow the market and cut prices by $2 to $4 a barrel from OPEC's $34 official price.
"Nothing is expected to tighten the market substantially. I think that the Saudis will lower the price structure because they think prices have become too high," one U.S. official said.
Washington-based oil specialist Philip K. Verleger Jr., who works in the commodity division of brokerage house Drexel Burnham Lambert, foresees a three-stage cut in oil prices.
"The next countries will be the Nigerians and other Africans Algeria and Libya , and then the Iranians," he said. "The Saudi cut will be the last and the least, maybe by only $2 a barrel."
Britain, which produces 2.2 million barrels a day, had hoped to avoid being the first leading exporter to lower prices and thus stand accused of trying to start a price war. It relented under pressure from its buyers, however, making the reduction retroactive to Feb. 1. Norway generally follows British pricing policy and quickly announced a matching cut.
The North Sea cuts put heavy pressure on Nigeria, widely considered to be OPEC's weakest link. Its light, low-sulfur oil is similar in quality to the British and Norwegian crudes and sells in the same West European and U.S. markets.
Buyers already have been shunning Nigerian oil because it is priced at $35.50 a barrel, or $2 more than the North Sea varieties before the reductions. As a result, Nigerian production has plunged to less than 550,000 barrels a day this month from 1.2 million in December and 2.3 million in 1980, Washington Post correspondent Leon Dash reported from Lagos. Annual revenues have dropped from a high of $26 billion three years ago to a hoped-for $8.6 billion in 1983.
Given these circumstances, Nigeria told its customers that it was about to lower prices by $4.50 to $5.50 a barrel during the weekend or early next week, according to wire service reports quoting sources in the companies that buy Nigerian oil.
Nigerian officials refused to confirm or deny the reports. The French news agency Agence France-Presse quoted industry sources as saying that government circles appeared to be split on whether to cut prices, with some advisers opposed to a break with OPEC and others favoring a reduction to draw back buyers and lift revenues.
Transportation Minister Umaru Dikko, a leading adviser of President Shehu Shagari and brother of Nigeria's oil czar Yahaya Dikko, suggested in an interview with Dash that the country would have to seriously consider breaking with OPEC if the cartel's decisions substantially hurt Nigerian interests, but he added, "I think, as of now, we are far from that kind of decision."
Kuwaiti Oil Minister Ali Khalifa indicated that OPEC would be very angry with Nigeria if it lowered its prices unilaterally. In a statement quoted by the Kuwaiti news agency, he said that two OPEC members, whom he did not name, were expected to lower prices to 50 cents a barrel less than North Sea prices and added: "This dangerous trend will of necessity deprive these two states of any right to speak about or negotiate with us the basic $34 price of OPEC."
In Caracas, Venezuelan Energy Minister Humberto Calderon Berti announced plans to send missions to oil-producing states to seek to put together an agreement to avoid a price war. While Venezuela has supported OPEC's official $34 price, oil industry sources in Caracas told Washington Post correspondent Jackson Diehl that the Venezuelans favored an OPEC agreement to lower the price by several dollars and fix strict production agreements to support it.