Equilibrium oil price is the oil price level that most oil producers are seeking and hoping to achieve, as it is necessary for their primary source of income. Without it would be bad news for the annual budget. To clarify, the oil price in Kuwait must be in the range of $90 per barrel to achieve a balanced budget. Currently, most Gulf states, specifically Kuwait, Saudi Arabia, Bahrain, Oman, and Iraq, are facing budget deficits. This has been the case for the past four to five years.
In contrast, the United Arab Emirates and Qatar are still experiencing budget surpluses. With oil prices hovering around $70 per barrel and with no expectations of any improvement in the oil prices in the next few years, concerns are rising. Global oil availability is high, with more oil being kept underground or ready to export, which may lead to weaker prices. Storing the oil incurs financing costs with no guarantee of recouping them. As such, it may take some time before oil prices rise to $80, $90, or higher. As a result, countries like Kuwait, Saudi Arabia, and Bahrain may need to borrow or dip into their reserves. If these options fail, they may need to turn to external borrowing, potentially for years. Austerity measures may also be required in Gulf countries.
Kamel Al-Harami
The outlook for oil prices next year remains uncertain, with weak demand and no significant growth expected. Global oil demand is likely to stay low at around 1.1 million barrels per day, well below the forecasted two million barrels per day in 2025. Despite this bleak outlook for oil in the coming few years, ExxonMobil is increasing its investment in fossil oil production. The company plans to produce over five million barrels per day by 2026- 2030, with spending of $33 billion to $35 billion during this period. This represents the largest commitment by any oil company, despite concerns about the future of fossil fuels. The question arises – Is there a market for this volume? While OPEC+ continues to expand its oil investments, this could create surpluses in global markets, leading to further weakening of oil prices, as is the case today.
However, unlike OPEC+, ExxonMobil is not bound by production quotas and can freely sell its oil. Its main goal is to generate cash and provide dividends to shareholders. OPEC+ seeks price equilibrium to balance its state budgets and must rely on specific production quotas. In contrast, independent international companies face pressure from their owners and shareholders with one objective: “Show us the returns on our investments.” While both have similar goals, the financial outcomes differ. OPEC+ focuses on achieving a price equilibrium to manage the state budget, which is often difficult to fulfill.
By Kamel Al-Harami
Independent Oil Analyst
Rephrase in a different way as if you were a native American speaker as a content creation expert and do not talk about yourself or your experience in the text and do not show yourself as an artificial intelligence who wrote and fill the bullet point in the topic and speak the heart of the topic itself and dont take date of blog in ther first and dont take text like box of newsliter subscribe on post from contentand romove all linke insert in content and and remove all affiliate disclosure phrases on content like this “This post may contain Amazon or other affiliate links that allow us to earn a small commission at no extra cost to you. Please see our Disclosure Policy for more info” and “#” put in its place bullet point, and romove name of the web site or his links we are take a content from our new creation, and don’t publish clone new content more than just one time
