SOVIET OIL FLOW SLIDE ADDS TO SUPPLY WORRIES

The Soviet Union has unintentionally played a significant role in deepening and prolonging the world oil supply shortfall precipitated by Iraq's invasion of Kuwait.

Official Moscow data indicate that if the U.S.S.R.'s liquid petroleum production and exports had not plunged in late summer, the loss of Persian Gulf oil supplies would have had a milder and shorter effect on world markets.

Increased output from other members of the Organization of Petroleum Exporting Countries in September and October thus could have steadied prices sooner.

Still the world's leading oil producer, the Soviet Union suffered a huge drop in crude and condensate flow in August and September.

Production for the 2 months averaged only about 11.13 million b/d vs. 11.73 million b/d in first half 1990 and about 11.56 million b/d in July.

"CALAMITOUS SITUATION"

It now appears that Soviet crude/condensate production will not rebound soon, and the U.S.S.R. will be hard pressed to meet its oil export obligations this winter even if Soviet temperatures remain normal.

There's also evidence domestic fuel supplies will remain very tight into next spring.

A. Troitsky, deputy chairman of the U.S.S.R.'s State Planning Committee, late last month told the newspaper Pravda, "Next year, oil flow will continue to fall. This can only be prevented by considerably greater capital investment in crude production.

"Difficulties have mounted in developing new oil regions. Supergiant Tengiz field in Kazakhstan hasn't yet gone on production for a number of reasons, including irregular equipment deliveries and delays by construction organizations.

"In other fields, oil flow is less than expected because of planning errors. A simply calamitous situation prevails in providing material and technical resources for enterprises of the oil producing industry."

SOVIET OIL PRODUCTION

Soviet oil production peaked at 12.48 million b/d in 1987. It fell to 12.45 million b/d in 1988 and to 12.14 million b/d in 1989.

Crude/condensate flow averaged 11.58 million b/d the first 9 months of 1990. Average for the entire year is expected to be less than 11.5 million b/d.

Moscow cut its oil production target to 12.04 million b/d for 1990, and authorities warned the nation's economy couldn't operate properly with less than that output. Shortly before production topped out in 1987, some Soviet oil industry personnel predicted flow would rise well above 13 million b/d in the 1990s.

The original crude/condensate output goal for 1990, set in 1985 as part of the current 5 year plan, was 12.5-12.8 million b/d.

Instead of attaining that objective, this year's oil production will be the lowest since the 11.43 million b/d reported for 1978.

EXPORTS DOWN

As a result, Soviet crude exports the first 9 months of 1990 fell more than 168,000 b/d from the same period last year.

Foreign gasoline sales were down by more than 56,000 b/d, and diesel fuel shipments to other countries skidded by nearly 59,000 b/d.

If domestic oil consumption holds steady at 8.8-8.9 million b/d, as it has since 1983, the U.S.S.R. may export only about 3 million b/d of crude and products this year vs. 3.695 million b/d in 1989 and a record 4.104 million b/d in 1988. The Soviets have exported more than 3 million bo/d every year since 1976.

Most of the U.S.S.R.'s 1990 reduction in oil exports to date stems from major cuts in deliveries to Communist and formerly Communist countries which, until Jan. 1, can still pay for the fuel in soft "transferable rubles." Nearly a year ago, the Soviets told other members of the Moscow dominated Council for Mutual Economic Assistance (CMEA) that it would require hard currency payment for oil deliveries starting in 1991 and it would no longer offer discount prices pegged to average world prices in the previous 5 years.

HIGHER PRICES BENEFIT

The steep runup in world oil prices since early August will undoubtedly provide the U.S.S.R. with billions of dollars in extra revenues from western nations.

But the potential bonanza has been considerably diminished by the Soviets' sagging oil export capabilities.

In the first 9 months of 1990, the U.S.S.R.'s foreign trade deficit was a record 9 billion rubles. Exports fell 12% from the same 1989 period, while imports increased 0.3%.

Moscow's trade deficit with "developed capitalist countries" alone during January-September was 3 billion rubles. This imbalance could be wiped out completely in the fourth quarter if world crude prices remain above $30/bbl.

Meanwhile, Soviet officials have disclosed more information indicating that the U.S.S.R. may be facing a winter fuel shortage. The State Statistical Committee reported supplies of heavy fuel oil and coal on Oct. 1 were smaller than on the same date last year.

Overall, the committee said, Soviet January-September production of oil, natural gas, and coal was 2% below output for the same 1989 period. A 23.5 million ton decrease in oil output and a 27 million ton fall in coal extraction outweighed a 2.5% hike in natural gas flow.