19.10.2016, 22:33
IMF raises Saudi breakeven oil price estimate
OREANDA-NEWS. The IMF increased its estimate of the Saudi breakeven oil price as it noted the largest Opec producer is running a larger budget deficit than previously expected.
The IMF in its latest outlook for the Middle East and North Africa region projected the Saudi breakeven oil price - the level at which it can balance its budget - at $79.70/bl for 2016 and $77.70/bl for 2017. In its April outlook, the IMF projected a $66.70/bl breakeven price for this year. It projected the Saudi government borrowing at 14.1pc of GDP in 2016, up from its previous estimate of 13.5pc.
The IMF cautions against over-reliance in using the breakeven price to gauge production and capacity levels. But many analysts use the metric as a gauge for the ability of state-owned or -controlled oil companies to sustain production in a low price environment.
Riyadh last month instituted austerity measures to cut public spending, and the IMF outlook may not fully reflect the extent of the measures. The IMF has expressed support for the Saudi push to diversify its oil-dependent economy, while cautioning that the effect of the Vision 2030 reforms cannot yet be determined with certainty.
The upward revision in the Saudi breakeven oil price contrasts with lower prices the IMF estimated for other key Middle East producers. It lowered the projected 2016 breakeven price to $55.30/bl for Iran and $58.30/bl for Iraq, from the previous projections of $61.50/bl and $59.70/bl, respectively.
The IMF also upped its projections of oil and natural gas production for the Middle East and North Africa region to 27.27mn b/d this year and 27.98mn b/d in 2017, from 25.7mn b/d in 2015. But Opec countries reached a tentative agreement on 28 September during a meeting in Algiers to cut output to 32.5mn-33mn bl.
Saudi crude output was at 10.53mn b/d September, while Iran's produced 3.63mn b/d and Iraq's output was 4.32mn b/d, based on Argus estimates.
The IMF in its latest outlook for the Middle East and North Africa region projected the Saudi breakeven oil price - the level at which it can balance its budget - at $79.70/bl for 2016 and $77.70/bl for 2017. In its April outlook, the IMF projected a $66.70/bl breakeven price for this year. It projected the Saudi government borrowing at 14.1pc of GDP in 2016, up from its previous estimate of 13.5pc.
The IMF cautions against over-reliance in using the breakeven price to gauge production and capacity levels. But many analysts use the metric as a gauge for the ability of state-owned or -controlled oil companies to sustain production in a low price environment.
Riyadh last month instituted austerity measures to cut public spending, and the IMF outlook may not fully reflect the extent of the measures. The IMF has expressed support for the Saudi push to diversify its oil-dependent economy, while cautioning that the effect of the Vision 2030 reforms cannot yet be determined with certainty.
The upward revision in the Saudi breakeven oil price contrasts with lower prices the IMF estimated for other key Middle East producers. It lowered the projected 2016 breakeven price to $55.30/bl for Iran and $58.30/bl for Iraq, from the previous projections of $61.50/bl and $59.70/bl, respectively.
The IMF also upped its projections of oil and natural gas production for the Middle East and North Africa region to 27.27mn b/d this year and 27.98mn b/d in 2017, from 25.7mn b/d in 2015. But Opec countries reached a tentative agreement on 28 September during a meeting in Algiers to cut output to 32.5mn-33mn bl.
Saudi crude output was at 10.53mn b/d September, while Iran's produced 3.63mn b/d and Iraq's output was 4.32mn b/d, based on Argus estimates.
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