Algeria cuts spending to offset falling oil prices
Algeria’s oil minister, Youcef Yousfi, on Sunday called on OPEC to cut production in order to raise oil prices and defend smaller producers in the cartel. The country is struggling to deal with oil prices losing nearly half their value in the last six months as other OPEC members keep production levels steady.
“For us, OPEC has to intervene to correct the imbalance and cut production to bring up prices and defend the income of its member states,” Yousfi said in remarks carried by the state news agency.
While Algeria has some $200 billion in foreign reserves (enough to cover imports for the next several years), it is dependent on oil revenue, which provides 97% of its hard currency income and 60% of the budget, reports the Associated Press.
In a cabinet meeting Tuesday, President Abdelaziz Bouteflika expressed concern over the “worrisome” situation and made promises to cut costs. The first of the austerity measures came Saturday when Prime Minister Abdelmalek Sellal said there would be a freeze on public sector hiring in 2015. Government positions account for some 60% of jobs in Algeria.
Major infrastructure projects are also expected to be put on hold for the time being. Public transportation in Algiers and highways in the countryside may be put off until the government has a more robust source of income.
Yousfi said that it is OPEC’s responsibility to take action to help member countries in times like these. He said, “We believe that OPEC should defend the interests of its members by cutting output so prices will go up. We do not share the views of big producers inside OPEC who say the market can regulate the prices,” reports Reuters.
Iran looks to increase output by developing oilfields with Iraq
While Algeria and other small OPEC members continue to lobby the group to cut production, OPEC’s second largest producer, Iraq, has entered into a deal with neighboring Iran to develop oilfields near the countries’ shared border, reports Bloomberg.
Iran’s cabinet approved a four-year, $15 billion plan to jointly develop oilfields with Iraq that will increase the nation’s production capacity by 550 MBOPD, the Islamic Republic News Agency (IRNA) reported.
The Islamic Republic of Iran canceled its contract with China National Petroleum Corp. in January to develop South Azadegan oilfield near the Iraq border because of project delays. The IRNA report did not indicate how the cooperation with Iraq would be funded. Iran’s estimated capacity is 3,500 MBOPD with current output of 2,780 MBOPD.
Saudi Arabia expects $80 per barrel for 2015
Bloomberg reports that Saudi Arabia’s 2015 budget is “probably assuming an oil price of $80 a barrel,” and will be seen as a sign of confidence in the market, according to a former economic adviser to the country’s government.
The assumption is down from $103 a barrel for this year, but still higher than the $60 a barrel many were expecting. The Kingdom set spending for 2015 at 860 billion riyals ($229 billion) with revenue falling to 715 billion riyals ($190 billion) from 1.046 trillion riyals ($278 billion) in 2014, the Finance Ministry said.
“Everyone was expecting to see a budget built on a price around $60, but that would have sent a negative message to the oil market,” said John Sfakianakis, former chief economic adviser to Saudi Arabia’s Ministry of Finance. “With a fiscal breakeven price of $80 a barrel, the government is sending a message to the market that we are expecting to see a rebound in oil prices.”
Oil tankers still blaze in Libya
Militants from the group Libya Dawn attacked an oil refinery at Es Sider, Libya’s largest oil port, setting six tankers on fire last Tuesday. Three of the six tankers have been extinguished while the rest continue to burn, reports Bloomberg.
The attackers were repelled, but the country is now only outputting 128 MBOPD from fields connected to the eastern port of Hariga. Total oil output, adding in offshore fields and Brega output, is around 350 MBOPD, only 22% of the 1,600 MBOPD it produced before the 2011 civil war, according to Reuters.
The destroyed tankers wiped out more than two days of Libyan production. Libya has appealed to Italy, Germany and the U.S. to send firefighters.
Fighting in the country has forced Libya to shut down Es Sider and Ras Lanuf, the two largest ports in the country, as well as the Zawiya and Mellitah ports in the west of the country.
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