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Iran’s Impossible Task: $194 Oil

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Via Oilprice.com

Iran’s fiscal breakeven oil price—the one at which the country would be able to balance its budget—is US$194.60 a barrel for 2020, the International Monetary Fund (IMF) said in a report on Monday, in which it lowered its economic growth forecasts for the entire Middle East region.

Due to the U.S. sanctions severely constraining Iran’s oil exports, the Islamic Republic would have balanced its budget for 2019 if oil prices were at US$155.60 per barrel, according to the IMF’s estimates in its Regional Economic Outlook published today.

Saudi Arabia, the world’s top oil exporter and OPEC’s largest producer, would need oil prices at US$86.50 this year and US$83.60 next year in order to balance its budget, the IMF predicts.

In its report, the fund lowered its estimates for economic growth in the Middle East, citing volatile oil prices, faltering global growth rate, and heightened geopolitical tensions.

Economic growth in Gulf Cooperation Council (GCC) countries—that is Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE)—is expected at just 0.7 percent this year, notably down from the 2-percent growth last year. This decline will be mostly due to the production cut agreement of the OPEC+ pact, the IMF said. Related: Oil Rebounds On Rare Market Optimism

Next year, the economies of those countries are expected to collectively grow by 2.5 percent, thanks to real oil GDP growth because of rising oil production in Kuwait and Saudi Arabia, the start of full operations at the Jizan refinery in Saudi Arabia, and increased natural gas production in Oman and Qatar, the IMF said. The 2020 projection, however, is uncertain because it’s not clear yet if OPEC and allies will let the production cuts pact to expire by March 2020, according to the IMF. 

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Saudi Arabia’s real GDP growth is set to edge up by just 0.2 percent in 2019, before picking up to 2.2 percent in 2020.

Iran’s economy, on the other hand, “has entered a steep recession,” with output expected to drop by 9.5 percent this year, the IMF said.

“Iran’s main export, oil, is severely restricted, and imports have collapsed,” the fund noted.  

By Tsvetana Paraskova for Oilprice.com

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