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Gulf fiscal breakeven oil prices to drop in 2022 on higher crude output, govt spending: IIF

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Gulf fiscal breakeven oil prices to drop in 2022 on higher crude output, govt spending: IIF

Highlights

Qatar to have lowest breakeven price, Bahrain the highest

Iraq to have smallest drop in oil breakeven

Gulf economic growth to accelerate in 2022 on higher oil, gas output

The fiscal breakeven oil prices for the six Gulf states and other Middle East oil exporters needed to balance their budgets will be lower year on year in 2022, due to higher crude and gas production and limited government spending cuts, the Institute of International Finance said Oct. 11.

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"The fiscal situations are now a on firmer footing," the IIF said in a report. "The expected further improvement in non-hydrocarbon revenues, recovery in volume of oil and natural gas exports, and restrained spending will lower further the fiscal break-even oil prices in 2022, particularly in Saudi Arabia, Oman, Qatar, and Algeria."

Qatar will have the lowest Gulf fiscal breakeven of $44/b in 2022, down from $52/b in 2021, according to the IIF.

Bahrain, the smallest Gulf oil producer, will have the highest fiscal breakeven of $76/b in 2022, down from $82/b in 2021.

Saudi Arabia, the world's biggest oil exporter, will see its fiscal breakeven fall to $67/b in 2022, from $75/b in 2021.

The UAE, the third biggest OPEC producer, will benefit from a drop in its fiscal breakeven to $64/b in 2022, from $69/b in 2021.

OPEC member Kuwait will see its fiscal breakeven decline to $61/b in 2022, from $65/b in 2021.

Oman, the biggest Middle East oil producer outside the OPEC group, will have a lower fiscal breakeven of $67/b in 2022, compared with $74/b in 2021.

Economic growth to accelerate

Other Middle Eastern oil exporters will also enjoy lower fiscal breakeven oil prices.

Iraq, the OPEC's second biggest producer, will have a breakeven oil price of $62/b in 2022, down from $63/b in 2021.

OPEC member Algeria will see its fiscal breakeven drop to $72/b in 2022, from $77/b in 2021.

Overall, economic growth in the Gulf region will accelerate in 2022, from 2021, "supported by higher oil and gas prices and production, progress in vaccination that restores domestic activity, and the implementation of deeper structural reforms," the IIF said.

The UAE will enjoy the highest Gulf economic growth of 4.9% in 2022, up from 2.2% in 2021, while Oman will have the lowest economic growth of 3.3% in 2022, up from 2.2% in 2021, according to the report.

Saudi Arabia's economy, the biggest in the Arab world, will have the second-highest growth rate of 4.8% in 2022, up from 1.9% in 2021, "supported by significant increase in oil production in the context of OPEC+ agreement," the IIF said.

Kuwait's economy will grow 4% in 2022, up from 0.4% in 2021, and Bahrain's economy will accelerate 3.5% in 2022, from 3% in 2021, the report said.

Economic growth in Qatar will also accelerate to 3.8% in 2022, from 3.1% in 2021. Qatar currently has an LNG production capacity of some 77 million mt/year but has plans to boost it to 110 million mt/year with the addition of four more trains, and to 126 million mt/year with two additional trains.

"We expect strong recovery in 2021 and 2022, supported by the strengthening of oil and gas prices, the revival in domestic demand on the back of the progress made in vaccination, and the end of the three-year blockade of Qatar by Saudi Arabia, the UAE, Egypt, and Bahrain," the IIF said.