Suddenly, the Disappearing Glut

Gasoline prices are starting to rise as the oil market tightens

Just when Americans were getting used to cheaper gasoline at the pump, prices have suddenly started to creep up again. The reason: a developing squeeze on worldwide petroleum stockpiles and supplies. Production cuts by Saudi Arabia, the largest single oil producer in the 13-nation Organization of Petroleum Exporting Countries, have combined with a continuing rundown of excess inventories by oil companies to start wiping out the price-depressing effects of last winter's oil glut. Says Claude Messinger of Ashland Oil, who was the chairman of a gathering last week in New York of the American Petroleum Institute: "In my judgment, gasoline prices have bottomed out. We are in for a small, but steady, climb back up."

From a low of fractionally less than $1 per gal. for unleaded regular on some markets, gasoline prices have started to firm up. According to Daniel Lundberg, publisher of the Lundberg Letter, a gasoline marketing weekly, the average nationwide price of fuel at the pump has nudged up by close to 1-c- since mid-April, to about $1.18 per gal. The rise was the first since March 1981, when gasoline prices peaked at an average of nearly $1.38 per gal. Lundberg expects that the cost of gasoline will jump 3-c- to 4-c- more by the end of the month.

Prices have also begun to edge up on the international spot market, where oil companies and traders buy small amounts of crude on a day-to-day basis.

The spot market is closely watched by oilmen for signs of future price trends in the industry as a whole. Last week oil was being sold for as much as $34 per bbl., up sharply from the $27.50-per-bbl. price in March.

Part of the reason for the higher cost of crude is dwindling oil company inventories. From January to April, energy firms drew down their stocks at a rate of anywhere from 3 million to 5 million bbl. per day. But now that the price of oil has begun to stabilize, at least temporarily, some industry analysts expect oilmen to begin replenishing their storage tanks. Energy Expert Lawrence Goldstein of the Petroleum Industry Research Foundation estimates that by autumn the non-Communist world's oil needs from OPEC will reach about 20 million bbl. per day. At present, however, the cartel's producers are pumping less than 17.5 million bbl. out of the ground.

The firming international price of crude also represents an initial success for Saudi Arabia, which for the past two months has directed a high-stakes strategy to firm up the market. Saudi Petroleum Minister Sheik Ahmed Zaki Yamani had feared that a continuation of the yearlong slide in petroleum prices could destroy OPEC. Thus, at the organization's March meeting, he succeeded in winning agreement on an unprecedented package of production cuts of 700,000 bbl. per day, or 3.8% of total OPEC output.

This week OPEC ministers will meet in Quito, Ecuador, to review the results of their efforts, and they will find plenty of reason for satisfaction. Though oil analysts were widely skeptical that the organization's members would abide by their pledges, OPEC has succeeded in staying below its output targets. Meanwhile last week, reports circulated within the industry that Saudi Arabia, in an effort to drive oil prices even higher, had cut its production still further, perhaps to as little as 6 million to 6.5 million bbl. a day.

With petroleum prices stabilizing, Wall Street's energy stocks have staged a rebound from the severely depressed levels of last winter and earlier this spring. In recent weeks, Mobil Corp., the second largest U.S.-based multinational oil concern, has risen 22% in value, to nearly $25 a share, while Standard Oil Co. (Indiana), which markets under the Amoco brand name, has rocketed upward by about 30%, to $44.50 a share.

During the past year, the declining cost of gasoline has been one of the major factors behind the sharp drop in consumer prices. This new development of steady gasoline prices, and perhaps even slightly rising ones, will be bad news for the Reagan Administration and its fight against inflation.

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