L.A. oil producers remain cautious, despite Iraq; plans to uncap wells in jeopardy as crude prices ease.

L.A. oil producers remain cautious, despite Iraq

After leaping $10 a barrel in five quick jumps since Iraq invaded Kuwait Aug. 2, prices posted for crude oil produced in Los Angeles County fell $1.50 last Monday.

That reversal may scuttle producers' plans to uncap wells shut in when prices fell below production costs, said Thomas R. Hunt II, executive vice president of California Independent Petroleum Association. "Independent producers here are being very cautious."

Hunt likened the posted price increases over the last month to a "temporary increase in your paycheck -- nothing to go out and buy a house with.

L.A.-based Unocal Copr., for example, pared its posted price for 17-degree-gravity crude from the Wilmington field by $1.50 last Monday to $22.20 a barrel. The company earlier in August had raised its price there by $10 in five increase of $2 each after Irag's Aug. 2 invasion of Kuwait.

Before that event, though, Unocal raised its price in that field in three steps to $13.70 Aug. 1 from $10.20 in early July, reversing a price-cutting trend that saw the Wilmington field price fall from $17.50 in January.

Since there is no shortage of crude oil locally, higher prices here may have merely reflected "hype" on commodity exchages about a possible worlwide shortage. A possible shortage is based on the United Nations embargo of oil produced in Iraq and Kuwait until Iraq withdraws its military from Kuwait.

Iraq was producing 3.14 million barrels of crude daily, Kuwait another 1.5 million, said Albert J. Anton Jr., analyst at Carl H. Pforzheimer & Co., a New York securities house specialing in petroleum. Together, he said, the two Persian Gulf countries were producing 4.64 million barrels of crude daily, but 400,000 barrels are consumed internally> so, the embargo has cut off exports of 4.25 million barrels daily.

Meanwhile, Anton continued, other member nations of the Organization of Petroleum Exporting Countries agreed last week to increase their output to help make up for lost Iraq/Kuwait oil exports. "But it looks like the most they can get out is an extra 3.6 million barrels," he said, and that would leave a gap of at least 650,000 barrels daily.

Soudi Arabia is expected to increase its daily output (in increments of 100,000) by 2 million barrels above the nation's OPEC quota set in July, Anton said, Venezuala by 500,000, United Arab Emirates by 550,000, Iran by 160,000.

While really not all that meaningful today, given plentiful stocks of crude in storage, the gap, if continued, could create a "real squeeze by October" and spur much higher prices, Anton said. this could be the result of a "wait'em out' scenario, he said.

Anton's other two scenarios include:

* War could break out with missiles hurled by Iraq at Saudi oil fields. That would create a "frenzy" at commodity exchanges with crude prices spurting to $40 of $50 a barrel, Anton said, but they "won't last" because the war would not last long and production could be restored relatively quickly.

* Peace could break out, and that would mean lower crude prices, for OPEC's hold will be "shaky" in trying to maintain a price of $21 a barrel. Iraq's President Saddam Hussein is getting more conciliatory and obviously realizes he made a mistake, Anton said, what with with the embargo sending consumer prices skyrocketing already inBaghdad and Basra.

"Can OPEC put the genie back in the bottle?" asked Norman Mains, research director at Bateman Eichler, Hill Ricahrds Inc., L.A.-based securities house. It will be difficult to get countries that need foreign exchange credits, such as Venezuela, to cut back production again, Mains remarked.

As noted, crube inventories remain lofty, both nationally and no the West Coast, according to industry figures reported last week by American Petroleum Institute:

Crude stocks in the United State rose to 376.61 million barrels as of the latest reporting period (Aug. 24) from 375.67 million a week earlier and 333.32 million a year earlier.

Crude stocks on the West Coast totaled 81.49 million barrels, up from 73.32 million a year ago. To be sure, the latest figure is down from 86.46 million a week earlier, but anything exceeding 80 million is considered abundant, industry observers said.

West Coast gasoline stocks, though, are another story: They full to 26.61 million barrels from 26.64 million a week earlier and 31.35 million a year earlier, API revealed.

At 26 million barrels, declared Jim Wampner, West Coast gasoline stocks are "down to the bottom of the barrel." The manager of volume planning at L.A.-based Atlantic Richfield Co. said a level in the 27 million to 28 million range would be "more comfortable."

West Coast gasoline stocks still have not recovered from when many Western refineries were shut down earlier this year. Thus, despite the cut in posted crude prices last week, Wampner predicted gasoline prices will stay up a while longer.

A mid-Wilshire Arco station, for example, was charging $1.189 a gallon for unleaded gasoline last week. That compares with $1.39 on July 31 and $1.089 Aug. 1, reflecting the new nickel-a-gallon Proposition 111 transportation tax, which went into effect then after being approved by voters in June.