Oil exporters to be hurt most in Middle East by coronavirus: IMF

Dubai — Major oil exporters will suffer the sharpest economic contractions this year out of nations in the Middle East and Central Asia region as they are hit by the double whammy of lower oil prices and reduced demand, the IMF said Oct. 19.

Real GDP for oil exporters including Saudi Arabia and Iran will shrink 6.6% this year, the International Monetary Fund said in its regional outlook. That compares with a 6% contraction for Gulf Cooperation Council members. Oil exporters will show a $224-billion shortfall in oil revenue this year because of COVID-19, Jihad Azour, director of the IMF's Middle East/Central Asia Department, told reporters. Next year, oil exporters will show the fastest growth in the region of 3.4% compared with 2.3% for the GCC.

Oil exporters cover GCC members Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, along with Algeria, Iran, Iraq, Libya and Yemen. GDP for the oil sector alone in the region would fall 7.7% in 2020, also reflecting US sanctions on Iran, it said. Saudi Arabia's economy would shrink 5.4% this year and rebound by 3.1% next year, Azour said.

"In the near and medium term, oversupply and large inventories remain concerns, while demand continues to be dampened by low air traffic volume (despite recovering road traffic)," the IMF said.

Oil futures

OPEC and allies have still managed to stabilize the oil market with their historic output cuts started in May, and oil futures are looking like they will move higher, the IMF said. "Oil futures curves indicate that prices are expected to increase toward $48/b in the medium term (from $41 in 2020), remaining some 25% below the 2019 average."

The OPEC+ coalition enacted a 9.7 million b/d production cut accord for May to July, after which they agreed to roll back the cuts to 7.7 million b/d for the rest of this year and then to 5.8 million b/d in January. The OPEC+ Joint Ministerial Monitoring Committee, which Saudi Arabia and Russia co-chair, is meeting on Oct. 19 to review compliance while the next full OPEC+ meeting is Nov. 30-Dec. 1.

The plunge in oil prices in the first half of 2020 combined with the output cuts is pointing to lower revenue for the region's oil exporters, the IMF said. "Available data point to a collapse in oil revenues during the first half of 2020, approaching a maximum of 50% (for Iraq)," it said.

The coronavirus crisis has highlighted "important vulnerabilities" in the region, including high debt, exposure to oil market volatility and high unemployment, the IMF said. With some countries reporting more coronavirus cases, another lockdown might be the death knell for some companies, it said. "Businesses that survived the first lockdown may not be able to survive a second one," it said. The IMF has provided about $17 billion of financing to 14 countries in the region this year, up 50% from last year, Azour said.