The Organization of Petroleum Exporting Countries yesterday ratified an increase in production to make up for oil lost to world markets because of the Persian Gulf crisis. Oil prices immediately dropped to their lowest point in nearly three weeks.
There are signs, however, that the loss of supplies from Iraq and Kuwait is disrupting the flow of crude oil and that refined products -- especially jet fuel -- are being squeezed in some places. The Pentagon, in particular, was reporting problems in ensuring supplies of the vital fuel.
While the OPEC production increase was targeted for developing countries, several that depended on Iraqi or Kuwaiti crude are scrambling for oil -- a quest complicated in some places by their lack of hard currency to pay for it. Others that have ample sources of supply are also struggling to pay the higher costs.
The Defense Department, which is consuming vast quantities of jet fuel for the airlift of troops and equipment to Saudi Arabia, said yesterday that it has been unable to find suppliers for all the fuel it needs. Kuwait was the U.S. military's principal supplier of aircraft fuel for the western Pacific region, including Japan and the Philippines, Pentagon officials said.
Frank Burkacki, a spokesman for the Defense Fuel Supply Center in Alexandria, said the center sought bids on Aug. 23 for the supply of 1.1 million barrels of jet fuel for delivery in the first three weeks of September, but received bids for only 845,000 barrels.
In addition, he said, the department has sought new bids on 3.5 million barrels to be delivered Oct. 1 through Dec. 31 because that contract had been awarded to the Kuwaitis. "They were unable to deliver," he said.
One well-informed official said the Pentagon's supply problem was compounded by a decision last spring to save money by letting its normal fuel inventories dwindle. Now the military has to replenish those supplies as well as find fuel for "Operation Desert Shield," he said.
Spokesmen for several major U.S. oil companies said they are fulfilling their contracts to supply fuel to airlines but the tight market created by military demand made it difficult to serve new customers or commit themselves beyond the expiration of current agreements. Some reports said that airlines throughout Asia are short of fuel because Kuwait's refineries are not delivering and Saudi Arabia's output has been diverted to the mammoth military operation there.
According to the American Petroleum Institute, the oil industry trade association, U.S. commercial stocks of jet fuel totaled 43.2 million barrels last week, an increase over the previous week and over the same week a year ago. But traders and analysts said the figure is deceiving because it includes supplies snapped up by some airlines that feared a shortage.
"Some airlines are building inventory because of fear," said John Armbrust, a Washington-based jet fuel trader. He said that in a normal market, the 4.6 million barrels sought by the Pentagon "is not a lot, but in a panic market, it causes panic buying."
He identified United Airlines as an "aggressive" buyer of jet fuel to be held in storage. United declined to comment.
The price of crude oil for October delivery closed at $25.92 a barrel yesterday in trading on the New York Mercantile Exchange -- the lowest since Aug. 9. A week ago, before diplomatic initiatives eased fears of war in the Persian Gulf region, the price approached $32.
Venezuela, Saudi Arabia and the United Arab Emirates had announced they would increase production no matter what OPEC did, but the resolution approved yesterday keeps them within an ostensible framework of agreement with their OPEC partners. Iraq did not attend the meeting.
The effect of the resolution is to authorize members to exceed production ceilings agreed to at an OPEC meeting in July thought at the time to satisfy Iraq's demand for reduced production and higher prices. That agreement was shattered by Iraq's invasion of Kuwait, but the resolution adopted yesterday said the July agreement will take effect again when "the present crisis is deemed to be over."
The July agreement, adopted at a time when the world oil price was about $18 a barrel, set a target price of $21. The resolution adopted yesterday did not set any specific price or any specific production targets.
Kuwait and Iraq between them had been exporting 4.3 million barrels of oil a day, 9 percent of the non-Communist world's production. Reporters in Vienna said they were told that Saudi Arabia alone is expected to increase its output by nearly 3 million barrels a day by the end of the year.
Anxious to defuse charges that they are being manipulated by the United States, the OPEC ministers specified that their resolution was aimed at helping poor and developing countries that have been hit hard by the oil crisis.
"The additional supplies of oil from OPEC member countries and the release of stocks by consumers should be primarily directed toward the countries of the Third World which are those that will be most immediately and adversely affected by any supply disruption," the resolution said.
Some of these countries, including all the nations of Central America, say they have sufficient oil sources of supplies but cannot pay the higher price caused by the crisis. Others were dependent on imports from Iraq or Kuwait and have to find new supplies -- supplies that may not be compatible with the specifications of their refineries.
Brazil has been especially hard hit because it obtained much of its oil from Iraq in barter arrangements, mostly for weapons.
Japan, which before the crisis was obtaining 4.7 percent of its imported oil from Iraq and 9.1 percent from Kuwait, and Western European countries, which obtained 17 percent of their imports from the two, seem affluent enough to buy elsewhere at market prices, passing the cost along to prosperous consumers.
Their situation is similar to that of the United States, which had been receiving about 9 percent of its imports from Iraq and Kuwait, according to Energy Department figures.
The burden is greater for countries like the Philippines, Bangladesh, South Korea and Taiwan, which were heavily dependent on Iraqi and Kuwaiti oil. They are negotiating for additional supplies from Iran, Saudi Arabia, Indonesia, Malaysia and China.
Special correspondent Michael Z. Wise contributed to this article from Vienna.