The April market rout, which crashed oil prices into the low $60s per barrel, is creating additional fiscal challenges to petrostates and oil-producing countries heavily dependent on oil revenues, on top of any tariff-related hardships.
As Brent Crude prices sank to $63 per barrel, major producers in the Gulf region, as well as Brazil and Nigeria, are looking to contain the fallout from the price plunge. Russia’s central bank has already signaled that the oil price decline could hit its economy hard.
Oil at $60 is about $20 to $30 per barrel lower than what many major oil exporters in the Gulf need to balance their budgets. For Saudi Arabia, the world’s top crude oil exporter, its budget breakeven price is $91 per barrel, as estimated by the International Monetary Fund (IMF).
With prices much lower than the breakeven price, Saudi Arabia may have to accelerate government borrowing and slow or delay spending on its ambitious futuristic megalomaniac projects.
Another major Gulf oil producer, Kuwait, last month approved a financing and liquidity law that will allow OPEC’s fourth-largest producer to return to the debt market after eight years.
Kuwait’s economy remains in recession due to OPEC+ production cuts, the International Monetary Fund (IMF) said in December 2024, adding that the economy is “highly exposed” to commodity price volatility and a global growth slowdown.
The price crash of the past week isn’t helping at all.
“The oil price drop we’ve seen over the last week has taken us into territory where for a lot of oil-dependent economies, it’s not going to be what they need to balance their budgets, nowhere close,” Richard Bronze, head of geopolitics at Energy Aspects, told Reuters this week.
For Russia, the oil market meltdown in recent days could pose risks to the economy, Russia’s Central Bank Governor Elvira Nabiullina said earlier this week.
“If the escalation of the tariff wars continues, this usually leads to a decline in global trade and the global economy and, possibly, demand for our energy resources. Therefore, there are risks here,” Nabiullina was quoted as saying by Russia’s TASS news agency.