Huge O.P.E.C. surplus shrinks

Press, 18 November 1981, Page 9

Huge O.P.E.C. surplus shrinks

NZPA-Reuter Kuwait The spectre of a financial crisis brought on by a huge, persistent surplus of O.P.E.C. petrodollars that haunted the world’s bankers just a year ago has vanished, according to bankers and economists in the oil-exporting Gulf. The fear was that the international banking system might fail to recycle the money amassed by members of the Organisation of Petroleum Exporting Countries back into the world economy and it therefore could not be loaned to needy nations with large balance-cf-payments deficits. But the combined surplus of the 13 O.P.E.C. members, which peaked at almost SUSIIO billion last year, could fall to zero as early as 1983, economists say. Falling oil demand and the promise of an O.P.E.C. price freeze until the end of 1982 have trimmed forecasts for O.P.E.C. revenues. Meanwhile, their investment in development projects is running well above what many experts originally thoughtwas likely. The Saudi Arabian Oil Minister (Sheikh Ahmed Zaki Yamani) says O.P.E.C.’s apparent ■ earnings could disappear by the end of 1982 if the total value of O.P.E.C oil exports stagnates at the 1980 level because of the fall in world demand. O.P.E.C. oil output averaged less than 27 million barrels daily in 1980. This was down from a 1979 peak of about 31 million. The_

decline continued this year,. bringing total production in September to little ■ more than 20 million barrels per day. The Bankers- Trust Company said in a recent study, that it believes O.P.E.C.’s current account will be in deficit by 1984. Saudi Arabia, Kuwait, Iraq and the United Arab Emirates together hold about two-thirds of O.P.E.C.’s total external assets, estimated at about SUS4OO billion. While the prospect that the world’s banks might not be able to put O.P.E.C.’s money to productive . use was one nightmare, there is now concern among some economists that a sharp reduction in O.P.E.C. spending power might also be bad for the world economy. The Middle East O.P.E.C. countries, with their vast spending on infrastructure development in the late 19705, were often portrayed as the engine of world economic growth. But Arab bankers in Kuwait doubt that a sharply trimmed O.P.E.C. surplus or a move into deficit by the oil exporters will cause significant nroblems. Hikmat Nashashibi, chief executive of the Al-Mal Arab investment banking group, said predictions of a declining O.P.E.C surplus often failed to take account of the scale on income from the investments held by the richer O.P.E.C. countries.