Although the war between Iraq and Iran is continuing and both the United States and Europe are having hard winters, there is no sign the world faces another price-boosting oil shortage during 1981.
Ironically, the prospect of ample supplies later in the year may be one reason official OPEC crude oil prices have risen an average of about $4 a barrel, to a range of $32 to $41, instead of the $3 expected at the time the new ceilings were set at an OPEC meeting in Bali last month. According to reports from some of the participants, the exporters believe oil markets will be too soft later this year to support increases at that time.
More immediately, State Department officials confirmed that despite the war Iran and Iraq have resumed oil exports that now may total 1.4 million barrels a day compared with 3.5 million barrels before hostilities broke out last September.
Iran now is exporting roughly 1 million barrels of oil daily, with most of it flowing through its war-damaged Kharg Island terminal, up from its prewar level of about 750,000 barrels a day. Iraq is moving up to 400,000 barrels a day through its pipeline crossing Turkey to the Mediterranean, but the flow is sometimes erratic.
Meanwhile, most of the remaining shortfall is being covered by added production from other nations and by an elimination of most inventory-building by consuming nations. Saudi Arabian exports, for instance, continue at or above the 10-million-barrel-a-day level, up at least 500,000 barrels from its prewar level. Kuwait and some other oil producers also have increased output in the wake of the war.
Before the war began last September, oil inventories around the world were being built up at a seasonally adjusted rate of at least 1 million barrels a day, perhaps more, according to oil industry experts. With most of that now stopped, with the resumption of exports from Iran and Iraq, and with the added production from Saudi Arabia and other countries, the current loss of oil to world markets is probably less than 500,000 barrels a day.
Even that shortfall could be eliminated soon. Iranian officials have indicated they would like to boost exports to as much as 2 million barrels a day. To help sales to such countries as Spain, India, Romania and other Eastern European nations, Iran raised its prices by less than other producers.
State Department officials said Iran is able to use the Kharg Island terminal for supertankers because of its "redundant" loading facilities. In other words, even though some parts of it have been damaged by Iraqi raids, other parts still are functioning. Moreover, repair work is already under way.
All of Iraq's Persian Gulf loading facilities, on the other hand, are completely out of commission and will take from six to 18 months to rebuild, according to the authoritative newsletter Petroleum Intelligence Weekly. Iraq's pipeline through Turkey has a capacity of about 700,000 barrels a day and a second line through Syria to the Mediterranean has a 400,000-barrel-a-day-capacity.
Evidence of at least a rough balance between supply and demand during 1981 is seen in the spot market where delivered prices are being cited that are close to or in a few cases even below official prices. Government officials in the United Sates, Western Europe and Japan have been very successful in persuading oil companies not to buy on the spot market to avoid putting new pressure on official OPEC prices. Part of the reason, of course, was the record level of inventories around the world when the war started.
The harsh winter in the United States has not depleted U.S. stocks to a significant degree, according to Department of Energy figures. Inventories of crude oil and petroleum products in the week ended Jan. 9 were still higher than at any time in history on that date.
With the United States economy expected to decline or grow very little in the first half of 1981 and only moderately in the second half, and with several major European countries either in or on the verge of recession, most analysts expect world oil demand to decline again this year. Should Iran and Iraq end their war and resume their desired production levels, the prospective rough balance between supply and demand could turn into a true glut. In that case, Saudi Arabia undoubtedly could cut its exports to its desired level of 8.5 million barrels a day or even less.
On the other hand, a renewed halt in shipments from Iran and Iraq or some brand-new interruption in Middle East oil output could lead to another major turn of the OPEC price screw.