Low oil prices cause Middle East economies to collapse

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ANKARA / ISTANBUL- Anadolu Agency

Low oil prices cause Middle East economies to collapse

The environment of low oil prices on the world market is leading to the collapse of the oil producing countries of the Middle East, whose economies are highly dependent on the production and exports of crude oil.

Due to the new coronavirus (COVID-19) which keeps world oil consumption low and the oil price war between Saudi Arabia and Russia, crude oil prices have fluctuated below $ 30 per barrel since March 6, when OPEC and non-OPEC countries failed to reach an exit contract.

Low crude prices pose a serious threat to most oil producing countries in the Middle East and North Africa (MENA) which need higher oil prices to balance their budgets.

Nigeria needs a breakeven price of $ 144 per barrel of Brent crude on average to balance its government balance this year, while Bahrain needs $ 96 per barrel, according to data from the world rating agency Fitch Ratings.

Saudi Arabia, OPEC heavyweights and the world’s largest crude exporter need breakeven $ 91 per barrel, while Oman needs $ 82 per barrel, Abu Dhabi has need $ 65 a barrel and Qatar needs $ 55 a barrel, according to the data.

While Algeria needs 109 dollars a barrel of average Brent in 2020 to balance its budget, Angola has an equilibrium price of 55 dollars a barrel and the United Arab Emirates (UAE) needs 70 dollars a barrel, according to International
Monetary Fund (IMF) data.

Data show that Venezuela and Libya each need about $ 100 a barrel to balance their budgets this year, while Iraq is at $ 60 a barrel and Iran at $ 195 a barrel.

For non-OPEC countries such as Russia, Mexico and Kazakhstan, an average Brent crude price of $ 42 per barrel, $ 49 per barrel and $ 58 per barrel is needed this year to balance their budgets.

MENA oil-producing countries are also expected to post lower economic growth rates in 2020 due to low oil prices, according to the International Institute of Finance (IIF).

Saudi Arabia is now expected to grow 0.7% this year, down from previous forecast of 2%. While Kuwait’s economic growth forecasts are lowered to 0.8% from 2.8%; the UAE now has a growth forecast of 0.6%, against 1.9%.

The Iraqi economy is expected to contract by 0.3%, instead of growing by 3.2%; and the Iranian economy is expected to shrink 8.4% this year, down from 5.1%.

If oil prices average around $ 40 a barrel this year, IIF said it estimates that nine oil-exporting countries in the MENA region will see their oil revenues drop by a total of $ 192 billion.

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