Earlier this year the news media were flooded by articles from experts, politicians, and academics all repeating the same prognosis: oil prices are going to collapse to below $20 per barrel, oil market turmoil will continue, and OPEC is finished as an organi-zation.
But now, less than three months later, the oil market is returning to normal. Spot prices are up, nearing the level of official OPEC prices. OPEC oil exporters are sticking to their production quotas and refraining from discounting their prices. In short, the oil market psychology is beginning to turn around to a mood of optimism.
Non-OPEC producers, a major factor in the instability of the oil market, are also behaving themselves. Mexico has pledged that its 1983 export volume will be restricted to 1.5 million barrels per day. The Soviet Union and Egypt have actually raised prices by 25 to 60 cents per barrel, closing their price gap with the official OPEC market price of $29 a barrel; and even free market-oriented Britain is staying in line by holding firm to oil prices acceptable to OPEC.
At the same time, signs of economic recovery, the key to oil market strength, are seen everywhere. The demand for oil is expected to be slightly up in 1983-84 in the industrial world. The developing world, which experienced its first-ever decline in demand for oil in 1983, is also returning to higher levels of demand. More important, withdrawal of oil from stockpiles, though still significant, has slowed down and is likely to be reduced to minor levels by mid-summer. This will further strengthen the oil market, OPEC, and oil prices.
What has brought about such a fundamental change in attitude in so short a time?