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Most experts say that because consumption is gradually rising, the OPEC countries should simply stand by their prices. "If OPEC just sits tight this time, it will probably come through," said an international oil analyst in Paris. "The market is looking for a psychological boost, and it's in OPEC'S interest to provide one." Moreover, the timing of OPEC's current crisis, at the beginning of the cold-weather season, puts the group at a better advantage than at its last trial, which occurred at winter's end.
Nonetheless, other authorities maintain that the OPEC benchmark will have to come down at least $1.50, particularly since Nigeria is selling on the cheap. The true market price of oil, if all producers exported at will, would be about $20 per bbl., and OPEC must at least partially close the gap between that price and the official $29 level. Said Safer: "My guess is, the OPEC countries will come to their senses." In a speech to a gathering of energy experts in London, Energy Secretary Donald Hodel predicted last week that world prices could fall to $25 per bbl.
That kind of drop would be very good news to homeowners as the weather gets colder. Last winter the price of home heating oil jumped by about 100 per gal. in two months, to $1.17, when a series of cold snaps hit the U.S. But if this winter is normal, a decline in crude prices of $1.50 could bring a 30 drop in heating oil, to $1.02 per gal. Heating-oil users are also benefiting from the fuel's competition with natural gas, which currently is in abundant supply in the U.S. Possibly adding to the gas glut is the Canadian government's decision in July to stimulate exports. Last week a leading exporter, Pan-Alberta Gas, announced that it would reduce prices to some U.S. utilities by as much as 30%.
Because of the approaching heating season in much of the Northern Hemisphere, demand for oil would normally be high this month. Yet many are putting off their purchases in the hope that prices will fall even further. Supplies in the U.S. are low and getting lower. Last month oil imports to the U.S. fell 9.6% from a year earlier. Stockpiles in Western countries equal only 94 days of consumption, the lowest for the month of October since 1979. As soon as oil companies begin topping off their tanks for the winter, prices may snap back. Said a confident Mani Said al-Oteiba, Oil Minister of the United Arab Emirates: "It's a matter of weeks.'' —By Stephen Koepp.
Reported by Barry Hillenbrand/Bahrain and Lawrence Malkin/Paris