The Organization of the Petroleum Exporting Countries (OPEC) reported its first collective budget deficit in 18 years. OPEC's petroleum export revenue declined by almost half in 2015, slumping by 46% to $518.2 billion from 2014, according to its annual statistical report.
The results do not include Gabon, which rejoined the group in June but includes Indonesia, which returned last year. The value of exports fell by 29.1% year-on-year, while the imports dropped by 8.7%. The report added that the cartel’s budget deficit stood at $99.6 billion in 2015, after logging a surplus of $238.1 billion in 2014. (See also: OPEC Leaves Oil Market on Autopilot.)
Statistics underline that the oil-price plunge, which started in the second-half of 2014, weighed on the crude-dependent economies. The turbulence began with the global oil surplus led by accelerated production in the U.S. and a sluggish Chinese demand. Meanwhile, OPEC members failed to curb excess production, which resulted in oil trading at around $50 a barrel today, down from $96.29 in the preceding year.
U.S. output grew by 8.3% in 2015, the biggest increase in the world. Global crude production edged up to 1.75 million barrels per day, the second-highest increase in 10 years. It was during the 1998 financial crisis, which crashed the Asian economies, that OPEC also posted a collective deficit. Additionally, competition for market share between Iran and Saudi Arabia pushed down crude oil prices to $10. Before falling to $27 per barrel this January, oil prices had rebounded to $115 per barrel by mid-2014. (See also: How OPEC (and Non-OPEC) Production Affects Oil Prices.)
Saudi export income has been significantly affected, falling sharply since 2013. According to the World Bank, the member country hurt most by declining revenues is Venezuela. It is suffering from scarcity of food and medicine and has logged a budget deficit of around 20% of GDP. After spending its foreign reserves, the country barely escaped from defaulting on a $1.5 billion bond in February.
Out of all OPEC members, only four countries maintained their current account in surplus last year: Qatar, Kuwait, the UAE, and Iran.
The Bottom Line
Global crude demand was up by 1.7% to 93 million barrels a day in 2015. The highest demand growth came from the Middle East, Africa, and Asia Pacific. Measures taken to curb the slide in oil prices have further added to the budget woes of OPEC member countries.