Experts see oil price dropping again. Production stays high, consumption low; large drop could hurt banks
Oil prices, which dropped substantially earlier this year, may be heading down again, a number of oil-market watchers predict. A combination of events appears to be dovetailing to depress the cost of crude, especially crude sold by members of the Organization of Petroleum Exporting Countries (OPEC).
This should be good news to America, Europe, and to third-world nations that do not export oil. Economists note that every $1 drop in OPEC prices adds 0.1 to 0.2 percent to the US gross national product and helps trim inflation.
But American oil companies and banks with international portfolios could experience new financial difficulties if the oil price drops substantially.
Economists and oil-market watchers note that:
* Prices of oil on the ''spot market'' - where oil is sold for immediate delivery - have been growing weaker.
* So far, neither US economic expansion nor seasonal weather patterns have necessitated significantly higher consumption of oil.
* The Soviet Union, the world's largest producer of oil, last week cut its export price by 50 cents a barrel.
* And, barring a disruption in supplies from the Middle East, more OPEC oil appears likely to hit Western markets in the near future.
Charles Maxwell, an influential oil analyst at New York's Cyrus J. Lawrence brokerage firm, notes that the odds ''are better than 1 out of 3'' that OPEC could be forced to drop its price $3 to $4 a barrel in the next six months. He sees the OPEC ministerial meeting in Geneva Dec. 7 as being crucial to the future price of oil.
At Platt's Oilgram in New York, editor Onnic Marashian observes that slack demand for oil in the West has been having an adverse effect on OPEC. He calls this ''a very critical time'' for the cartel.
''Right now we are hearing that there could be a price break in the second quarter of 1984, unless there is a severe winter or a disruption in oil supplies from the Middle East,'' Mr. Marashian says.
A contrary view, however, is taken by Joseph C. Story, senior economist with Wharton's Middle East Economic Service in Washington, D.C. A pickup in the American, Japanese, and European economies, he says, will increase demand for OPEC crude in the next few months. And if the winter turns out to be cold, that demand will increase further. He cautions against ''wishful thinking'' that prices will drop substantially.
Steven A. Wood, a senior economist at Chase Econometrics, holds the middle ground, predicting a decrease, but only by a couple dollars a barrel: ''I can see the oil price going to $27 (from today's $28-$29). Obviously, that's good news for the US economy. The whole transportation component of the economy becomes cheaper, and (American) incomes will have more purchasing power.''
At the same time, however, OPEC assets in US and European banks might be drawn down to cover revenue shortfalls. That could cause problems for some banks , although it could be balanced out by the ability of debtor countries, such as Brazil and Argentina, to make loan payments more easily.
The Soviet Union's 50-cent cut per barrel, reported last week by Petroleum Intelligence Weekly, comes as spot-market prices for Soviet crude have been dropping. The Soviet price had been 50 cents a barrel higher than the OPEC price , so the current drop does not actually undercut OPEC. But analysts say a further Soviet price cut could drive OPEC to slash prices to compete.
OPEC members have already been exceeding their self-imposed quota of 17.5 million barrels per day (b.p.d.), and there is growing disarray. Saudi Arabia and Iran are vying to head the 13-member cartel. Led by Iran, the more financially strapped members have argued for even tighter production and higher prices.
By virtue of its tremendous oil reserves, Saudi Arabia has the greatest clout in OPEC. In the first half of this year, the kingdom produced an average of 4.3 million b.p.d. That was down from 7.2 million b.p.d. in the first half of 1982. Current production is near 5 million b.p.d.
If the Saudis are to change their production level, it will most likely be a change for the higher. The Saudis would like to pump more oil to feed their new industries and to bring in money to bankroll Mideast allies.
Saudi Arabia recently announced plans to bring onstream important new supplies of natural gas, much of it tied to crude-oil production. That would mean keeping oil production at a minimum level of 4.5 million to 5 million b.p.d., industry experts say.
Moreover, concerned over a possible worsening of the Iran-Iraq war, Saudi Arabia has been stockpiling crude and ''slow steaming'' tanker shipments on the high seas. Mr. Marashian confirms that the Saudis for the past month have been storing oil in underground caverns near Yanbu, on the Red Sea.
At the Georgetown Center for Strategic Studies, G. Henry Schuler sees Saudi stockpiling as significant in light of OPEC concerns over the present oil glut. The slow-steaming tankers could eventually reach the West and be factored into the supply.
But the other side of the coin - the reason for the stockpiling in the first place - could be a problem for the West: imperiling of oil supplies from the Persian Gulf.