Why the oil market has the shakes - it's not just the sheikhs

Oil prices are wobbly again. By summer, prices could be back in the mid to low teens, meaning cheaper gasoline for summer travelers. Behind most of the new weakness in oil prices, some observers say, are the futures traders on the New York Mercantile Exchange. These traders, according to several analysts, have been ``talking down'' the market.

True, members of the Organization of Petroleum Exporting Countries are not the most disciplined bunch. There is evidence of some OPEC members selling more than the quotas they agreed to last December.

But that is not enough to account for the volatility in the oil futures market, says Bijan Mossavar-Rahmani, assistant director of Harvard University's Energy and Environmental Policy Center.

``It's not unraveling,'' Dr. Mossavar-Rahmani notes of the December OPEC accord. ``It's psychology. The traders are talking down the market. They made out like bandits last year because they gain under any kind of volatility.''

Futures markets, he says, ``give considerable scope to manipulation.''

OPEC has agreed to keep oil production just under 16 million barrels a day. It seems increasingly clear that overall OPEC output is exceeding that target. But Mossavar-Rahmani and others say the overrun is not so much from cheating as it is from higher demand from buyers.

William Randol and Ellen Macready, petroleum analysts with First Boston Corporation, concur that ``the OPEC accord is intact.'' Oil refiners, they say, have been drawing down inventories and putting more supply on the market in recent days, causing the agitation on the market. First Boston reckons oil prices will remain around their current level.

But whether it is the futures market wagging OPEC or genuine cheating on the part of cartel members, prices are indeed weak, says Sanford Margoshes, a veteran oil analyst with Shearson Lehman Brothers in New York. To chalk it up merely to ``market psychology,'' he says, is to describe what is happening, not to explain why it is happening.

Oil prices rose in December, Mr. Margoshes notes, in the ``flush of victory'' over the OPEC accord, a cold wave in Europe, and a worsening of the Iran-Iraq war.

Since mid-January, however, the market has given back all of that $4.50-a-barrel rise. The Gulf war has waned slightly, weather has returned to normal, and there is evidence of cheating on the OPEC accord by Kuwait, Dubai, Equador, and Iraq.

At the same time, Margoshes says, several major OPEC customers - notably British Petroleum and several big Japanese refiners - have been unwilling to sign multi-month contracts for oil. And, finally, the normal seasonal decline in oil runs from March through July.

``All of this is coming together,'' Margoshes says, and could cause crude oil prices to fall below $16 a barrel. That makes him ``a strong seller of the international oil stocks.''

An emergency meeting of OPEC could shore up prices somewhat, as could a turn for the worse in the Gulf war. Failing that, prices will remain weak. But none of these analysts expect a collapse. They talk of the mid-teens as the bottom end.

``For a collapse to happen,'' says analyst Mossavar-Rahmani, ``we would have to have `netback' agreements, which create vicious circles.''

Those netbacks, which peg the price of a barrel of crude to the market price of refined petroleum products, were largely responsible for the 1986 price decline and have been shunned by OPEC members since then.

The current lower-price trend means cheaper gasoline for motorists, but it also makes the United States more and more dependent on foreign oil.

On Wednesday, the US Department of Energy said American oil production will continue to fall this year even if world oil prices remain relatively stable.

In its quarterly forecast, the Energy Department said domestic crude production, which fell an average of 300,000 b.p.d. last year, would fall another 440,000 b.p.d. under a $17 price.

At $20 a barrel, the report said, the decline would be 380,000 b.p.d. and at $15 it would be 550,000 barrels. The Energy Department also said net imports of crude oil and refined products rose almost 25 percent, or 1 million b.p.d., in 1986, but the increase this year should be only 470,000 b.p.d.