Higher oil prices and an expected rebound in the global economy and oil demand are set to lower the fiscal breakeven oil price of the major Middle Eastern oil producers this year and next, with the breakeven oil price for Saudi Arabia dropping to $65.70 in 2022 from $77.90 in 2020, the International Monetary Fund (IMF) said.
In its regional economic outlook published on Sunday, the IMF forecasts that all oil exporters from the Middle East and North Africa (MENA)—except for Iran—will see their fiscal breakeven oil price, the oil price at which the fiscal balance is zero, lower in 2022 compared to previous years.
The expectations are based on assumptions that the authorities will keep the current policies in place and that the simple average of the Brent, Dubai Fateh, and WTI crude oil prices would be $52.64 a barrel in 2021 and $50.07 a barrel in 2022.
In the case of Saudi Arabia, the fiscal breakeven oil price is set to drop to as low as $65.70 next year, compared to $76.20 this year, and a high as $81.90 in the last pre-pandemic year 2019, according to the IMF.
Saudi Arabia, however, is not the producer with the lowest breakeven prices. To compare, the United Arab Emirates (UAE) is set to see its fiscal breakeven oil price at $60.40 next year, down from $68.20 in 2020 and $64.60 this year.
Qatar’s breakeven oil price is expected to drop to as low as $40.40 in 2022, from $46.20 in 2020 and $43.10 in 2021. Qatar has the lowest fiscal breakeven oil price among all MENA oil-exporting countries.
While lower fiscal breakeven price is good news for all oil-dependent economies to balance their budgets, climate change and the energy transition are creating new challenges for the Middle Eastern petrostates, the IMF said.
“The region’s oil exporters face the additional challenge of making the transition away from oil dependence as the world progressively shifts away from fossil fuels. Rebuilding financial buffers and pursuing economic and fiscal diversification while ameliorating any negative distributional impact on households, are key policy priorities in this regard,” the IMF noted.