The sliding value of the U.S. dollar may soon force the Organization of Petroleum Exporting Countries to raise its oil benchmark price setting the stage for prices as high as 22 dlrs a barrel by yearend top executives with U.S. oil companies said. The current benchmark price of 18 dlrs a barrel was established by the Organization of Petroleum Exporting Countries (OPEC) at its December meeting when the cartel set a 15.8 mln barrel per day production ceiling. But the continuing weakness of the U.S. dollar the currency used by OPEC for its oil sales is making the 18 dlr price difficult to sustain said Fred Hartley chairman of Unocal Corp &lt;UCL>. The U.S. dollar has fallen in value by about 10 pct since December and has fallen by a total of about 40 pct during the past two years. Hartley tolds he expected significantly higher oil prices this winter and would not rule out the potential for 25 dlrs a barrel by the spring of 1988. I think June will be the critical month to see what they do said Hartley who was in Houston to attend the World Petroleum Congress. OPEC has scheduled a regular meeting in June which some experts believe is likely to revive suggestions that oil should be priced according to a basket of world currencies instead of the U.S. dollar. E.H. Clark chairman of &lt;Baker Hughes Inc> said the Saudi kingdoms need to generate revenues -- rather than greater world demand -- would drive any price increases. The Saudis have made committments and have a balance of trade based on receiving 18 dlrs a barrel for this oil. But the U.S. dollar wont buy as much as it did five or six months ago Clark said in an interview. Im betting on the Saudi kings need to sustain revenues. Clark predicted that world oil prices would top 22 dlrs a barrel by January one. However the authoritative Middle East Economic Survey reported yesterday that Saudi Arabia would not seek to increase OPEC oil prices unless oil demand showed strong growth. Saudi sources told the newsletter that the policy was based on the longterm need to restore the competitive position of OPEC oil against other energy sources. Many oil industry experts are forecasting a modest increase in world oil demand averaging one pct annually during the next few years. Michel Moreau a director of the &lt;Elf Aquitaine Group> said he believed the worldwide oil industry had reached a consensus that prices of at least 20 dlrs a barrel were necessary to cover exploration costs royalties and taxes on new production. The 20 dlr level will be reached this year only if the cash-strapped nations of Nigeria Egypt and Gabon refrain from discounting oil prices or increasing production levels Moreau said. I think if more than two (OPEC nations) defect the production agreement will fall apart he said. But this threat is the Saudis big stick to keep producers in line. Nobody wants a repeat of the collapse that occurred in 1986. Lawrence Rawl chairman of Exxon Corp &lt;XON> tolds he expected prices would remain at 18 dlrs through the end of 1987 adding that 20 dlrs a barrel was a possibility. Other major companies are taking a more cautious view of prices fearing that some OPEC members may yet upset the cartels production agreement. This is a year of testing said Alfred Munk manager of foreign affairs at Amoco Corp. (AN). If they fail there may be a price decline to about 14 dlrs a barrel. French-owned Total CFPs vice president Pierre Vaillaud said Demand is not going up very quickly at best maybe one percent a year. You cant change the price with just one pct Vaillaud said.
DECLINE IN U.S. DOLLAR MAY BOOST OPEC OIL PRICE