OPEC’s crude oil export revenues for 2020 could decline to $323 billion, the U.S. Energy Information Administration said in a new report, noting that this would be the lowest revenue level in 18 years.
This would compare to $595 billion in oil revenues for 2019, the authority added.
Unsurprisingly, the biggest chunk of OPEC’s collective oil revenues for 2020 will be for Saudi Arabia as the biggest exporter in the cartel. For 2019, Saudi Arabia’s oil revenues totaled $202 billion—more than a third of the total—but last year’s revenues will be hit by the pandemic like those of its fellow OPEC exporters.
Like other forecasters, the EIA warned the lower oil revenues will have a strong negative impact on OPEC economies.
“The decrease in revenues could be detrimental to member countries’ fiscal budgets, which rely heavily on oil sales to import goods, fund social programs, and support public services,” the authority said.
OPEC itself is guardedly optimistic about the immediate future, however. Despite substantial deficits and a surge in loans to prop up budgets, the cartel expects oil demand to begin recovering this year.
In its latest Monthly Oil Market Report, the cartel forecast oil demand this year to rise by 5.9 million bpd, to reach 25.9 million bpd. The biggest drivers, again, would be Asian economies, where demand is seen jumping by 3.3 million bpd from 2020 when OPEC estimated it had fallen by as much as 9.8 million bpd.
The group was rather upbeat on demand trends in North America, despite the raging pandemic, noting that “The recovery in transportation fuels, including gasoline, is additionally linked to developments in the labour market and gasoline retail prices. The current outlook assumes a respectable recovery in both variables.”
Its outlook for European oil demand was less upbeat, as it noted the continent’s struggle to contain the spread of infection and the lockdowns that have sapped oil demand.
By Irina Slav for Oilprice.com
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Three noteworthy observations follow. One is that OPEC’s Arab Gulf members will continue to face a vicious circle vis-à-vis the diversification of their economies in coming years. They badly need to accelerate diversification and without higher oil prices diversification will virtually come to a standstill. They also need higher earnings to finance the major projects needed to diversify their economies and support the non-oil sector and therein lies the rub.
The second observation is that relief is on the way. If despite the very destructive power of the pandemic and a damaging oil price war their estimated revenues could only be 5% less than at the height of the oil price collapse in 2015, then the prospects of recovery in the global oil demand and prices in 2021 are far better than the doom and gloom sayers have been telling us. OPEC's Arab Gulf producers are projected to earn some $438 bn in 2021 based on an average Brent crude oil price of $60 a barrel this year and a global oil demand of 96 million barrels a day on average in 2021.
A third observation is that the claim by some analysts, investment banks, environmental activists and hydrocarbon asset divestment campaigners that the pandemic has brought forward peak oil demand is no more than wishful thinking and a pack of lies.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London