NOVEMBER 2018 oilandgasmiddleeast.com
The effect of the oil price is far-reaching for importers and
exporters alike. As the price of Brent crude crept up to $86 per
barrel in early October, speculation about prices in 2019, and
fear surrounding the potential consequences of those prices,
The US government has put pressure on OPEC to increase
supply, hoping to decrease oil prices before the country’s key
November congressional elections.
OPEC produces 32.5mn barrels of crude per day (bpd), as of
August 2018. Saudi Arabia, which contributes approximately
32% of OPEC production, plans to increase its oil output;
Saudi Arabian Crown Prince Mohammed bin Salman said in
October that the country has 1.3mn bpd spare capacity.
Iraq follows KSA with 14.27% of OPEC production, tailed by
Iran at 11%, which produces approximately 3.58mn bpd.
OPEC members like Iran and Venezuela, which have faced
serious output cuts and would be hurt by lower oil prices, have
shown strong opposition to a boost in output.
Based on data from the IMF, Venezuela would need oil
prices at an astounding $223 per barrel to balance its domestic
budget for 2018. On the opposite end, Russia (a non-OPEC
member) only requires $40 per barrel to balance its budget.
In May 2018 at the International Economic Forum, Russian
President Vladimir Putin said that oil at $60 per barrel was a
fair price, but the price has continued to rise as Venezuela’s
economic crisis continues and the world waits for US sanc-
tions against Iran to take effect in early November.
US sanctions could cause Iran’s oil supply to drop by up to
2mn bpd, which accounts for 6.1% of total OPEC production
(as of August 2018).
Based on figures from 2018, Iran would only need an oil
price of $68.1 per barrel to balance its budget. But the coun-
try’s budget was formulated before the US reinstated sanc-
How sanctions will impact the country, its place in the oil
market, and the market itself, remains to be seen.
Brent crude price until October 4, 2018 ($/barrel)
THE OIL PRICE
With OPEC facing mounting pressure from the US to increase output amidst rising oil prices,
this is the oil price that different OPEC countries and allies need to balance their budgets
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