With the next meeting of OPEC not happening till November 27, and with supply unlikely to waver before then, Nigeria, Iran, Venezuela and Russia, who depend on oil revenues for at least half their national budgets, should all brace for further drops in their revenue profile.
Speculation is mounting that OPEC will take action to try to stem the decline.
According to Deutsche Bank, an international finance organisation, Nigeria needs oil at $126 to balance its budget while Venezuela requires crude at $162.
Analysts expect a showdown at the Vienna meeting because the pain from falling oil prices is not being felt equally by OPEC’s 12 members, causing strains in the group.
With Brent at $82 a barrel, only Kuwait, Qatar, and United Arab Emirates will earn enough to balance their budgets, according to the International Monetary Fund, IMF.
One of the analysts said the meeting is going to be very contentious as Brent is now approaching $80 a barrel, which will hurt even the more-fiscally responsible members such as Qatar and the UAE. It’s also about $30 below what the Nigerians, Venezuelans and Iranians need.
The federal government of Nigeria which is caught in the web of the sliding oil price said it is taking proactive measures to respond to the challenge. But despite assurances by the Central Bank of Nigeria (CBN) that crashing oil price will not harm the economy, international analysts see the country being hit afterwards.
Nigeria’s foreign currency reserves, which were as high as $48.9 billion in May 2013, have fallen almost 10 per cent this year as authorities used the money to bolster the naira.
Already Nigeria has joined Russia, Colombia and Venezuela as the biggest losers from the decline in oil.
Like Nigeria, Venezuela is trying to resist the impact on its economy. “The price of oil will hit its floor and it will rise again,” President Nicolas Maduro assured Venezuelans, whose shaky economy depends critically on a high oil price. “Venezuela will continue with its social plans. Venezuela will move forward,” he said.
But analysts insist that the only major oil exporters not in deep trouble are the Arab countries, whose governments have room for manoeuvre because of low production costs, relatively small populations, and big foreign currency reserves.
Since June, the cost of a barrel of Brent crude, the benchmark for world oil prices, has fallen by almost a quarter, from around $110 a barrel (where it was stuck for the past four years) to just above $80 a barrel.