The coronavirus pandemic and collapsing oil prices will slash the oil and gas revenues of vulnerable oil-reliant developing economies by up to 85 percent, the heads of OPEC and the International Energy Agency (IEA) said in a joint statement as a growing number of countries are going into lockdown and oil demand is set to take an unprecedented hit.
Fatih Birol, the Executive Director of the IEA, and OPEC’s Secretary General Mohammad Barkindo spoke on the phone to discuss the current oil market situation and the potential impact of depressed demand and low oil prices on the global economy and on oil-producing nations with vulnerable economies.
“[I]f current market conditions continue, their income from oil and gas will fall by 50% to 85% in 2020, reaching the lowest levels in more than two decades, according to recent IEA analysis. This is likely to have major social and economic consequences, notably for public sector spending in vital areas such as healthcare and education,” OPEC and the IEA said in a joint release.
Last week, both OPEC and the IEA slashed their projections for oil demand this year, expecting zero and even negative growth in demand amid significant economic slowdown as the coronavirus spreads around the world. Global oil demand is set to drop this year for the first time since the financial crisis in 2009, the IEA said as it slashed its demand outlook by 1.1 million bpd. The IEA now sees global demand falling by 90,000 bpd year on year in 2020. Related: Largest Oil Glut In History Could Force Crude Prices Even Lower
OPEC, for its part, now sees global oil demand rising by mere 60,000 bpd in 2020 after it slashed its forecasts by 920,000 bpd from last month’s assessment.
On Friday, Birol tweeted that “Recent history shows that playing Russian roulette with the US shale industry through an oil ‘price war’ can backfire. The major victims are likely to be people in developing countries that still rely heavily on oil & gas revenues to fund their social & economic systems.”
The oil price war that OPEC’s top producer and de facto leader Saudi Arabia started will hurt the fiscal revenues of the oil producers in the Persian Gulf too, including those of Saudi Arabia, analysts say.
By Tsvetana Paraskova for Oilprice.com
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