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To: goldsnow who wrote (16246)	8/20/1998 7:06:00 PM
From: Alex	Read Replies (1) \| Respond to of 116816

OPEC facing income loss of $50 billion Copyright c 1998 Nando.net Copyright c 1998 Reuters News Service LONDON (August 20, 1998 11:01 a.m. EDT nandotimes.com) - OPEC oil producers face a $50 billion plunge in export income this year as a global glut smothers their efforts to revive crude prices. Organization of the Petroleum Exporting Countries revenues are on course to reach just $97 billion this year, more than a third down from $148 billion in 1997, said Leo Drollas of London's Center for Global Energy Studies. OPEC's 11 member countries, spanning the globe from Indonesia to Venezuela, are taking the brunt of the lowest oil prices in a decade. Benchmark Brent blend crude so far this year is averaging less than $14 a barrel and falling, more than a $5 shortfall compared with 1997. OPEC is not only getting paid less for its oil than last year, it is pumping less in a bid to boost prices for its economic lifeblood. But the supply-drenched market has barely responded to the 2.6 million barrels a day (bpd) of crude output cuts engineered by OPEC since March. Dramatic budget shortfalls and the threat of big fiscal deficits mean OPEC producers are having to hack back spending on social and infrastructure developments. Saudi Arabia -- which relies on petrodollars for three quarters of its state revenue -- is getting just $10 a barrel for its main Arab Light export grade against the $14.50-$15 it budgeted for this year. For every dollar shortfall in the price of oil, the Middle East country's treasury loses $2.5 billion a year. Drollas of the energy center calculates Saudi oil revenues this year are likely to fall nearly $17 billion short of last year's $49.9 billion. The price adversity has forced the government to issue a decree halting new oil production projects, imposing a 10 percent cut on some existing contracts and a freeze on government hiring. Fellow Persian Gulf big gun Iran this month drew up an economic recovery program to combat economic ills. Low petroleum revenues, combined with unemployment and inflation rates both running above 20 percent, have intensified conservative scrutiny on moderate President Mohammad Khatami. Cheap oil is at least nourishing the prospect of a revival in the Asian economies, where oil exporters had been pinning so much hope on fast demand growth. And low oil prices have also helped squash any threat of inflation in the West. But, as dwindling revenues fuel currency, unemployment and inflation woes in the more populous of OPEC's cash-pinched economies, so the prospect of social and political unrest multiplies. Indonesia, East Asia's main oil producer and the continent's only OPEC member, has already been forced into a change of leadership as its economic troubles intensified. In Latin America, Venezuela this week was forced to make another round of public spending cuts, this time targeting investment programs as it bid to control its widening fiscal deficit. The South American country has already cut public-sector spending and investment budgets by more than $3.5 billion this year. The same pressures have forced non-OPEC Mexico to slice its budget plans three times so far this year. A fourth cut is a possibility. The current hardship is a far cry from 1996 and 1997 when sustained price strength gave producers a revenue windfall. The bonanza prompted OPEC to pump up production by 10 percent late last year. But the move proved ill-timed, conspiring with Asian economic turmoil, a warm winter and increased Iraqi exports to spur the long downturn. There may be some light at the end of the tunnel. Some analysts are starting to argue world prices are at a turning point, with the global stock glut beginning to subside. London's Energy Market Consultants (EMC) has projected that the market's year-on-year surplus will soon ease significantly. But EMC added that the upside for prices this year remains very limited. By ANDREW MITCHELL, Reuters www2.nando.net