Venezuela, holder of the world’s largest oil reserves, requires the price of Brent crude to average $121 a barrel this year, about $14 more than current prices, for the country’s government to balance its budget, according to Deutsche Bank AG.
The break-even oil price for the South American nation has fallen from about $150 a barrel last year, the bank said, after the government allowed its currency to weaken last month to alleviate shortages of imports including medicine, food and toilet paper. Oil producers Russia, Nigeria and Bahrain also need prices higher than $100 a barrel to balance their budgets this year, Deutsche Bank said.
“Populist policies in Venezuela have taken a toll on oil production while government spending has increased,” said analysts led by Robert Burgess, chief economist at Deutsche Bank, in a report today. “The political crisis unfolding in Ukraine will weigh on the outlook for the Russian economy” and probably reduce non-oil revenues, he said.
Venezuela was rocked by violent protests in February and March against President Nicolas Maduro’s handling of crime and an economy with an annual inflation rate of 57.3 percent. While “oil production has also disappointed,” currency depreciation should allow state-run Petroleos de Venezuela SA to increase investment and boost production in the coming years, the bank said.
Russia would need an even higher oil price to balance its budget if the Ukraine crisis disrupts energy exports, meaning public spending could come under pressure, the bank said. President Vladimir Putin threatened yesterday to shut off gas deliveries through Ukraine unless European leaders took steps to stabilize the country.
Nigeria and Bahrain are both set to run fiscal deficits this year, with the nations requiring prices of $118.80 a barrel and $134.90 respectively to balance their budgets, Deutsche Bank said.
The imbalance in Nigeria, Africa’s largest oil producer, is forecast to narrow in 2014, after the break-even price climbed to $143.60 a barrel last year as oil production declined due to repeated sabotage. “The government’s revenue take from oil production fell further” and oil savings used to boost spending are now almost fully depleted, the bank said.
Nigerian oil output was 1.96 million barrels a day in 2013, the third lowest level since 2000, according to data compiled by Bloomberg.
“Oil production has also recovered a little and should reach 2.3 million barrels a day this year,” the bank said. “Presidential elections are just around the corner in February 2015, however, and there is a risk that spending will be higher.” In the absence of oil savings, this would mean increased borrowing, it said.
Deutsche Bank forecasts Brent crude to average $106.50 this year. Russia’s break-even level is $101.70 a barrel while Saudi Arabia needs $93.40 to balance its books. Brent was at $107.27 a barrel today.