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Most Middle East Oil Producers Won’t Break Even This Year

Middle East oil production

Most crude oil producers in the Middle East, Africa and the emerging economies of Europe (EEMEA) 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.

Still, Fitch notes that the low breakeven price enjoyed by Kuwait is related not just to low production costs, but also to the high oil production rate per capita and the projected investment income from its sovereign wealth fund.

Another 11 producing countries, however, need much higher oil prices, despite cutting subsidies and public spending, devaluating currencies, and taking other measures to balance their budgets in the wake of the oil price crash from 2014.

These include everyone from Saudi Arabia to Nigeria, with the West African nation in the worst shape, needing crude oil prices of $139 a barrel in order to achieve a fiscal balance of zero based on Fitch’s oil price prediction. Related: Saudi Arabia Alters Oil Pricing To Attract European Buyers

The rating agency explained that “For three EEMEA sovereigns - Nigeria, Angola and Gabon - our forecast fiscal break-evens for 2017 are substantially higher than 2015, in part due to rising government spending."

Next from the bottom, Fitch has ranked Bahrain, which would need oil at $84 to break even, Angola, needing oil at $82 per barrel, Oman, breaking even at oil at $75, and Saudi Arabia, which would need oil to cost $74 to balance its budget. Russia is right next to the kingdom, needing oil at $72 per barrel.

By Irina Slav for Oilprice.com

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