WASHINGTON - Saudi Arabia and other OPEC oil producers are flooding world markets with crude oil, a shift that experts say should help offset any economic dislocation from a military strike against Iraq.
The surge in production has helped wash away a $5-a-barrel "war premium" that pushed the price of crude above $30 in early October, industry experts say.
The increase in output may have reduced the risk of spot shortages during the initial stages of a U.S.-led military offensive. If sustained, it also could boost the economies of the United States and others.
"OPEC has increased production dramatically in the last 30 to 45 days, which is why we're seeing the price fall," said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation in New York.
The 11 members of the Organization of the Petroleum Exporting Countries have had little to say on the production boom.
But some experts believe it reflects a deliberate strategy by key OPEC producers to stockpile crude closer to markets in the United States, Europe and Asia, where it would be less vulnerable if war breaks out, and to prevent prices from rising to dangerously high levels.
"You have the potential for Iraq being taken off line very quickly, you have the potential for the winter being severe, and you have the question of whether we're coming out of a worldwide recession or sinking into one," said Edward D. Porter, of the American Petroleum Institute, an industry trade group. "OPEC doesn't want to trigger something it didn't intend."
Some oil analysts see less charitable motives at work. They point to evidence of an escalating battle for market share between the Saudis and other OPEC members, who are exceeding their official production quotas as never before.
The competition has been exacerbated by Iraqi production increases linked to President Saddam Hussein's efforts to placate critics and preserve his regime.
"The Saudis are focused on the long-term market for their oil," said Philip K. Verleger, an energy economist in Newport Beach, Calif. "They don't want to let anybody else capture it."
The effect of sharply higher oil production is to ease a major economic concern: that war in the Middle East would spark fears of shortages, driving crude prices sharply higher and damaging already shaky industrial economies.
The drop in crude prices has yet to show up at the gas pump. Local prices respond to their own market dynamics, and a combination of rising demand, low gasoline inventories and reduced refinery output has caused gasoline prices to continue to rise even as prices for crude have declined.
OPEC's rising output has improved the fortunes of oil transport companies. Tanker operators say increased demand for their services has allowed them to double some rates.
In September, all OPEC members except Iraq agreed to individual quotas that would limit their combined production to 21.7 million barrels a day.
The International Energy Agency in Paris reported Tuesday that actual "OPEC 10" output rose to 24.2 million barrels a day in October, setting a record for overproduction. The biggest quota-buster was Saudi Arabia, which traditionally has exercised more restraint than other OPEC members.
Goldstein of the Petroleum Industry Research Foundation said industry sources have told him that OPEC 10 production has continued its rapid rise this month and may be running as much as 3.5 million barrels a day above the official limit.
The extra oil has not yet made its way into refinery tanks in the United States and other consuming countries.
Warren Vieth is a reporter for the Los Angeles Times, a Tribune Publishing newspaper.