OPEC's strategy in tatters after Russia snub

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 the Organisation of the Petroleum Exporting Countries and such a dramatic fall in prices will put 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 US$31.02 on Monday, their lowest since mid-February 2016. At that low, prices were down nearly US$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 US$500 million in revenue, according to Reuters calculations.



Fiscal impact

The losses are a lot more pronounced when compared with the high of US$71.75 a barrel that Brent hit in January.

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 US$10 a barrel decline in oil prices lowers fiscal revenues by 2-4% of GDP, depending on the country, and fiscal break-even 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.

– Nampa/Reuters

Ahmad Ghaddar -