Oil outlook: OPEC still has its finger on the tap
The Organization of Petroleum Exporting Countries (OPEC), though torn by war and internal rivalries, will keep its tyranny over the supply and price of oil. So say a number of experts, who stress that world demand for oil -- not the cohesion of the 13-nation cartel -- will determine future market trends.
"The 13 members," says Georgia Macris, editor of Petroleum Intelligence Weekly, "have not been acting in concert for three years. Yet they still have their fingers on the tap."
"OPEC may never be the same," said John Lichtblau, executive director of the Petroleum Industry Research Foundation Inc. "But you don't need a cartel, if there is a shortage.
"And," he adds, "we are more likely to face a tight [supply] situation in the next few months than a surplus."
"There are so many imponderables," Miss Macris said. "First, there is the danger that the [Iran-Iraq] war can't be contained," in which case OPEC oil output might plummet further.
Even if the fighting stops, she asks, "How long will it take to bring back Iranian and Iraqi exports?"
Before the war, these two cartel members supplied the world with about 3.5 million barrels daily (m.b.d.). Now those exports have disappeared and total OPEC output hovers, experts believe, between 23 and 24 m.b.d.
Noncommunist nations need about 26 m.b.d. and a number of oil-importing countries are beginning to dip into inventories. Saudi Arabia, Kuwait, Qatar, and the United Arab Emirates have agreed to boost their output to make up some of the shortage.
"OPEC could get up close to 26 m.b.d.," said Mr. Lichtblau, "if all members cooperated." Even so, he adds, oil-importing nations would still have to make "a very modest drawdown of inventories."
If OPEC production falls considerably short of 26 m.b.d., a protracted war between Iran and Iraq -- or even a stalemate that kept these countries out of the export market -- could result in a world shortage of oil early next year, especially if the US and other industrial powers shake off the economic doldrums and begin to grow.
Macris cites another uncertainty. "How much oil will Iran and Iraq have to buy from other countries before their own production is restored?" In short, these major producers -- instead of supplying oil to the world -- might for a time have to import petroleum themselves.
For Iraq, with a domestic consumption of 200,000 barrels daily, this might not be hard. But Iran, with a much larger population, normally burns 700,000 barrels a day.
Iranian officials deny reports that already they are scouring the world to buy aviation fuel for their war effort against invading Iraq.
The noncommunist world's bedrock demand for OPEC oil closely coincides with the cartel's prewar output of about 27.5 m.b.d., down from a 31 m.b.d. average late last year.
Theoretically, at least, individual OPEC members could increase their output in a scramble to lock up larger shares of the world market.
In practice, however, most cartel members are limiting their production, either because their fields have reached maximum sustainable yields, or to stretch out the life of their oil assets.