Glut poses trouble for OPEC
Manama, Bahrain — Oil exporting nations will face a financial squeeze this year if the world oil glut persists and their payments surplus of $60 billion last year evaporates , Middle East economists and bankers say.
The situation will be eased slightly by income of about $30 billion from foreign investments made in more prosperous years.
But some hard-hit oil nations such as Venezuela and Nigeria are already being forced to borrow from world capital markets.
OPEC oil production has dropped to about 17 million barrels per day (b.p.d.), from 31 million in 1979, and the group has been forced to defend its $34 -a-barrel base because of weak demand around the globe.
OPEC expects output to average 20 million b.p.d. this year, which economists said would just about balance its external accounts.
The cartel's market monitoring committee sees demand rising to as high as 22. 5 million b.p.d. in the fourth quarter. Economists here said this looked possible and made unlikely some forecasts of a combined current-account deficit of up to $30 billion.
But the financial experts stressed the present uncertainty. A flare-up in the 20-month-old Iranian-Iraqi war could halt their exports and boost demand for oil from other OPEC countries. Peace would probably see the market flooded with crude from the two states, threatening the benchmark price, they said.