With oil erasing over a third of its value overnight after a messy breakup of the OPEC+ alliance, OPEC members are bleeding over half a billion dollars a day in lost revenue, according to Reuters calculations.
For the most part, oil is a top income source for members of OPEC and such a dramatic fall in prices will put a strain on their economies, some of which such as Iran and Venezuela, are already on the brink.
Brent crude futures were down by as much as 31% to $31.02 on March 9, their lowest since mid-February 2016. At that low, prices were down nearly $20 a barrel from a high before the meeting of OPEC and its allies on March 6.
This means that in total, and based on their average February production, OPEC members lost more than $500 million in revenue, according to Reuters calculations.
The losses are a lot more pronounced when compared with the high of $71.75 a barrel that Brent hit in January.
OPEC had been pushing for expanding the existing cuts with its allies, known as OPEC+, by an additional 1.5 million barrels per day (bbl/d) to over 3 million bbl/d until the end of the year. Russia turned the proposal down, causing the collapse of the alliance and the start of a price war over market share.
OPEC members Nigeria and Algeria on March 9 said the breakdown of the deal will be painful for producers.
For some nations, including one the group's richest members Saudi Arabia, fiscal budget break-even oil prices were already much higher than the oil price before the most recent collapse.
"A $10 a barrel decline in oil prices lowers fiscal revenues by 2%-4% of GDP, depending on the country, and fiscal breakeven prices are well above current levels for all Gulf Cooperation Council sovereigns," Jan Friedrich, head of Middle East and Africa sovereign ratings at Fitch Ratings said.
"However, at least the higher-rated sovereigns, particularly Kuwait, Qatar and Abu Dhabi, have ample buffers, mainly in the form of sovereign wealth funds," he added.
Recommended Reading
Marathon Petroleum Sets 2024 Capex at $1.25 Billion
2024-01-30 - Marathon Petroleum Corp. eyes standalone capex at $1.25 billion in 2024, down 10% compared to $1.4 billion in 2023 as it focuses on cost reduction and margin enhancement projects.
Humble Midstream II, Quantum Capital Form Partnership for Infrastructure Projects
2024-01-30 - Humble Midstream II Partners and Quantum Capital Group’s partnership will promote a focus on energy transition infrastructure.
BP’s Kate Thomson Promoted to CFO, Joins Board
2024-02-05 - Before becoming BP’s interim CFO in September 2023, Kate Thomson served as senior vice president of finance for production and operations.
Magnolia Oil & Gas Hikes Quarterly Cash Dividend by 13%
2024-02-05 - Magnolia’s dividend will rise 13% to $0.13 per share, the company said.
TPG Adds Lebovitz as Head of Infrastructure for Climate Investing Platform
2024-02-07 - TPG Rise Climate was launched in 2021 to make investments across asset classes in climate solutions globally.