Skepticism About OPEC Discounts Triggers Buying U.S. Crude Rises Past $17 a Barrel

NEW YORK — U.S. crude oil shot up 60 cents a barrel to break through $17 Thursday on buying triggered by skepticism about the extent of well-publicized price discounts by some OPEC nations.

West Texas Intermediate crude oil on the spot market rose 60 cents to $17.15 and the futures market also produced a big gain, rising from a low of $16.51 for oil delivered next month.

“There is a perception that perhaps OPEC is not discounting as heavily as originally thought, particularly Iran,” said Jim Steel, an analyst with Refco Inc. “The report about Iran seems not to be true,” he added.

Industry sources in Tokyo had said Thursday that Iran was offering to sell oil to Japanese long-term contract customers at a discount for February and March shipments as well as January.

Stephen Platt, an analyst with Dean Witter Reynolds Inc., said the oil price jump reflected the market’s nervousness “based on a lack of conviction that OPEC is offering any substantial discounts.”

Discounts--believed to be forced by a glut in world oil markets and overproduction by some OPEC members--have been the focus of attention this week, sparking heavy selling in oil markets. Thursday’s rise restored nearly all of the week’s losses. West Texas Intermediate closed at $17.31 a barrel last Friday.

“There were quite a few shorts out there early in the week who waited until today to cover,” said Ray Marchica, a trader with Cargill Investor Services. “Additionally, there was some fresh trade buying--new positions on the long side--which firmed things.”

Prices were also supported by reports that five Persian Gulf members of the Organization of Petroleum Exporting Countries reduced output this month by at least 1.5 million barrels a day to 10.3 million to help support prices. The output cuts--voluntarily by Abu Dhabi, Kuwait and Iraq and forced on Saudi Arabia and Iran by slack sales--did not work, the sources added, forcing a turn toward discounts.

The decline represents about a 3-million-barrel-a-day cut from the maximum output reached by the gulf producers in August, 1987, according to oil industry analysts.

Iran, facing buyer resistance after a U.S. oil boycott against it, was also forced to trim output. It now produces under 2 million barrels a day, compared to a quota of 2.369 million, industry sources said.

Egypt, meanwhile, cut the price of its top-grade crude by 90 cents to $15 a barrel for the last two weeks of January, but a decision on the prices of its other three blends was been postponed, an oil ministry source said Thursday.

Egypt is not a member of OPEC, but generally is guided in its pricing decisions by OPEC prices. It produces 870,000 barrels of oil daily, consuming half domestically and exporting half under long-term contracts.