Oil buyers to exploit glut

Press, 9 May 1981, Page 9

Oil buyers to exploit glut

NZPA-Reuter London Buyers who have banded together to force oil exporters to shave premium prices will next exploit a glut on the market to obtain extended credit terms on crude oil purchases, according to oil industry sources. With interest rates at high levels delayed payment is one way of cheapening the price of oil — analysts calculate that for each month payment is delayed the price of the barrel can be discounted by about 1.5 per cent.

For exporters battling to save their share of a surplusridden market, it also does not entail the loss of face that attaches to formal announcement of a price cut. Malaysia has become the latest victim of the oil glut. Oil industry sources in Kuala Lumpur said it was forced with effect from May 1 to wipe out a SUSI premium imposed on top of official prices ranging from $38.80 to $40.60 a barrel. London industry sources said Japan’s Trade and Industry meanwhile had pressed the Japanese Daikyo oil company to renegotiate a deal it had nearly clinched with Kuwait to buy 30,000 barrels a day of crude at a premium price.

Western and other Japanese companies have in the last month resisted Kuwaiti demands for premiums in a drive backed by the 21-nation International Energy Agency against payment of these surcharges, ostensibly levied as the price of assured access to long-term contract oil.

Exporters traditionally allowed payment for crude to be delayed for 60 days. That was widely cut to 30 days when oil was short during 1979. Industry sources said several companies were now thinking of 90 or more than 120 days.