Dubai — Saudi Arabia's economic growth forecast for 2020 will be lower than projected in October because of the OPEC+ agreement that will trim oil production through March, the International Monetary Fund said Monday in a report.
Saudi Arabia's 2020 GDP will be 1.9%, down from 2.2% projected in October, the IMF said. The fund kept its 2021 forecast at 2.2%, compared with 0.2% for 2019.
The kingdom has been cutting its oil production more than agreed under the OPEC+ accord as other nations including Iraq and Nigeria produced more than their quotas. OPEC and 10 other countries led by Russia agreed in December to deepen their cuts to 1.7 million b/d in January through March, up from 1.2 million b/d for last year. Saudi Arabia's energy minister Prince Abdulaziz bin Salman last week promised to keep the country's production in January and February at 9.744 million b/d, 400,000 b/d below its official OPEC quota.
"Growth in the Middle East and Central Asia region is expected at 2.8% in 2020 (0.1 percentage point lower than in the October World Economic Outlook), firming up to 3.2 percent in 2021," the IMF said in an update of its World Economic Outlook. "The downgrade for 2020 mostly reflects a downward revision to Saudi Arabia's projection on expected weaker oil output growth following the OPEC+ decision in December to extend supply cuts."
Saudi Arabia agreed to a voluntary 400,000 b/d cut beyond its quota at a December meeting as it continues to over comply with output cuts as was the case in 2019.
The IMF, which also lowered its global growth forecasts for 2020, warned that geopolitical tensions in the Middle East could threaten global oil supply.
"Rising geopolitical tensions, notably between the United States and Iran, could disrupt global oil supply, hurt sentiment and weaken already tentative business investment," the IMF said.
Tensions between Washington and Tehran intensified this month after the killing of a top Iranian commander in Baghdad, prompting Iranian retaliatory attacks on US troops in Iraq.
The incidents helped push Brent oil above $70/b for the first time since September on concerns about security of supply from the Middle East. Prices have since retreated, and were trading close to $65/b on Monday.
Political tension in the region has also been exacerbated by protests in Iraq, OPEC's second-largest oil producer, and by a war between rival factions in Libya, where about two-thirds of its oil output was shut over the weekend. Libya over the weekend declared force majeure on crude exports. Production from the country's largest oil field, Sharara, and El Feel, or Elephant, was curtailed on Sunday as Libyan National Army forces shuttered them, the state-run National Oil Corp. said. Both fields can produce around 400,000 b/d.
The country's prolonged civil conflict between the UN-backed Government of National Accord and the Libyan National Army, led by General Khalifa Haftar, has now lasted over 10 months, and is affecting Libya's oil shipments.
"Prospects for several economies remain subdued owing to rising geopolitical tensions (Iran), social unrest (including in Iraq and Lebanon), and civil strife (Libya, Syria, Yemen)," the IMF said.