Oil exporters to see large surpluses in 2021 and 2022 amid higher crude prices

Oil exporting countries will have large surpluses in 2021 and 2022 as higher crude prices lead to more revenues for many producers, according to the Institute of International Finance.

"Net hydrocarbon exports and hydrocarbon government revenues account for more than half of total exports and total government revenues, respectively in major oil exporters," the institute said in a report.

"Consequently, the fiscal deficits of 2020 will shift to large surpluses in 2021 and 2022 in most oil exporters, except in Nigeria, Kazakhstan and Algeria."

However, in Nigeria, Africa's largest producer, declining crude output will partially offset any gains from higher oil prices because of diminishing volume.

On Wednesday, Fitch Ratings said the higher oil prices, reform momentum, a gradual return of global trade and tourism are "brightening the economic prospects for much of the region, supported by Covid-19 vaccination and easing restrictions".

"The GCC will experience significant narrowing of fiscal deficits in 2021," the ratings agency said. Fitch's forecasts assume average Brent crude oil prices of $63 a barrel in 2021, accompanied by further unwinding of Opec+ production cuts.

As a result of the surge in oil windfall due to the crude price surge, the breakeven price of oil for exporting countries will continue to decline, falling below $70 per barrel for the UAE, Saudi Arabia, Qatar, Oman and Angola, according to the IIF.

Fitch estimates a fiscal break-even oil price range between $55 a barrel to $90 a barrel, depending on the country.

"Our calculations show that Russia’s fiscal breakeven oil price in 2022, $44 per barrel, will be the lowest among oil exporters, supported by the expected recovery in oil and natural gas exports in volume terms," IIF said in its report.

Oil prices have surged to multi-year highs this year, supported by a broader recovery in the global economy, which has led to a greater demand for crude.

Prices are also up because of underinvestment in the sector, leading to a tighter supply for crude as well as rising demand and a faster than expected recovery from the Covid-19 pandemic in developed markets.

While oil exporters will recover some of the ground lost to the decimation of the sector due to low energy prices last year, oil importing countries will be hurt the most due to the continuing rally in commodities.

"Higher energy prices will hurt several emerging and frontier market economies that remain heavily dependent on crude oil and natural gas imports," the IIF said.

"The terms of trade loss are particularly sizeable for countries with hydrocarbon imports of above 4 per cent of gross domestic product – including, Thailand, Turkey, Chile, Jordan, Morocco and Lebanon."

Large oil importers such as India have already called on Gulf oil producers to ease the pressure on their consumers by pumping more crude.

However, Opec+, the bloc of oil exporters, which is on course to bring 2 million barrels per day back to the market by the end of the year, has so far resisted pressures to significantly increase output.

"The sharp increase in oil and natural gas prices has begun to weigh on external balances, raising vulnerabilities for these countries," the IIF said.

"Wider current account deficits in these countries could lead to difficulty in meeting external financing."