OIL PRICE OUTLOOK

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP05T00644R000300960021-4
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 3
• Document Creation Date: December 22, 2016
• Document Release Date: February 5, 2010
• Sequence Number: 21
• Publication Date: October 16, 1979
• Content Type: MEMO

Sanitized Copy Approved for Release 2010/02/05: CIA-RDP05TOO644ROO0300960021-4
The D*r of Central Intelligence
Washington. D. C. 20505
16 October 1979
MEMORANDUM FOR: The Secretary of the Treasury
The Secretary of Commerce
Chairman, Board of Governors of
the Federal Reserve System
SUBJECT: Oil Price Outlook (U)
During our discussions at The Homestead last
Friday and Saturday on the state of the economy,
the prospects for further rises in the price of
energy figured prominently. I thought you might
like to see the attached memorandum, written last
Thursday, which states our view that a price rise
in December is highly likely. (C)
STANSFIELD TURNER
Attachment
NFAC 5470-79,
11 October 1979
C?NF iDEN N
]
At
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? CONHD ?
NFAC 5470-79
11 October 1979
MEMORANDUM
SUBJECT: Oil Price Outlook
and, in particular, future production levels in Iran,
Saudi Arabia, and Kuwait is still the dominant factor.
? This apprehension, together with expectations of
further OPEC price increases, is driving oil companies
and other stockholders to seek larger than normal inven-
tories. k
? Buyer apprehension over future supply availability.
Oil prices are likely to creep upward. during the re-
mainder of 1979 and to be increased at the December OPEC
meeting.
Even though Free World oil stocks are near normal
levels, spot market prices are running up to $15 per barrel
above official prices and the volume of oil traded on the
spot market is increasing. The conditions are likely to
persist at least through the remainder of 1979, giving the
OPEC nations a strong incentive to again increase their
official prices. Collective action by the cartel to raise
crude oil prices will almost certainly be taken at December's
ministerial session in Caracas. Even before that, however,
more members may follow the lead of Kuwait, Venezuela, and
non-OPEC producer Mexico and raise prices unilaterally.
Nigeria reportedly has received agreement from some customers
to a $3 per barrel price increase at Lagos' option.
There are several sources of market price pressure.
? Disparities in the OPEC crude.price structure
encourage those nations with relatively lower prices to
try to catch up with the others. The latest price hike
by Kuwait has increased the disparities. In particular,
Iran now finds itself charging less than Kuwait for com-
parable oil. The recent changes also, leaves Saudi
prices even further out of line with other suppliers.
C
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SUBJECT: Oil Price Outlook
The OPEC governments have not yet focused on the size of
a price increase for 1980. Some will wait to assess market
conditions on the eve of the Caracas meeting. Price increases
ranging from $2 - $5 per barrel were discussed by several
OPEC representatives at an early October seminar in Vienna.
Such increases would raise the average price of OPEC oil by
10 - 25 percent.
Uncertainties about future supplies will contribute to
price pressures into early 1980. Iranian instability poses
the most serious risk. Given these uncertainties, stockholders
will not allow their inventories to be drawn down as rapidly
as normal in first quarter 1980. Even if demand eases as the
US economic downturn takes hold, any price increases can be
expected to stick since the Saudis as well as the Kuwaitis
would.take the opportunity to reduce output to their desired
levels.
GONOFIDENTiAL
Sanitized Copy Approved for Release 2010/02/05: CIA-RDP05T00644R000300960021-4