E The Fiscal Breakeven Oil Price For OPEC Countries Has Been Coming Down

“Most crude oil producers in the Middle East, Africa and the emerging economies of Europe won’t be able to patch up their budgets this year, Fitch Ratings warned, forecasting an average price of $52.50 a barrel for the commodity in 2017, up from $45.10 a barrel for 2016. The exceptions are Kuwait, Qatar, and the Republic of Congo, all of which sport breakeven prices around the forecast 2017 average, with Kuwait actually having a breakeven level significantly below $52.50 a barrel at $45. For Qatar, the figure is $51 a barrel and for Congo it is $52 a barrel.” (Irina Slav, Most Middle East Oil Producers Won’t Break Even This Year, April 06, 2017)

Many of the oil producing countries need much higher oil prices if they want to balance their fiscal budgets.

Among the names of countries that require higher oil prices to equalize their government expenditures with revenues are Saudi Arabia and Nigeria. According to Fitch’s oil price analysis, Nigeria would require crude oil prices of $139 a barrel in order to achieve a fiscal balance of zero.

OPEC governments which rely on crude oil exports have been hurt by declining and weak oil prices. Recent oil price forecasts suggest continuing high fiscal deficits for many OPEC members in coming years.

The following chart sets out the fiscal breakeven price for major oil exporting countries. In this chart Fitch uses an average oil price forecast of $52.50 a barrel for 2017 to calculate the oil price needed to attain a balanced budget. The West Texas Intermediate (WTI) crude oil price on July 21, 2017 was $45.87 per barrel.

While there is a considerable difference in the fiscal positions of these countries, on average, the breakeven point has been moving lower for many exporters since the price squeeze has prompted considerable belt tightening.

Even in Saudi Arabia, the average oil price that the country needs to balance its fiscal budget has been falling.  The IMF recently concluded that in 2016 that the Saudi break-even price fell to $66.70 a barrel. Iran’s break-even price for 2016 was estimated to be $55.30 US.

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