A steep fall in crude prices allied with lower output will cost Arab oil producers nearly $108 billion (Dh396bn) in the last quarter of 2008 but their income climbed to an all-time high through the year, official figures showed yesterday.
A steady increase in oil prices in the first quarter boosted the revenues of the 10-nation Organisation of Arab Petroleum Exporting Countries (OAPEC) to as high as $146bn and to $188bn in the second quarter before they hit a quarterly record high of $191bn in the third quarter.
"However, they fell dramatically in the last quarter to $83bn," OAPEC said in its January bulletin. "Opec is now striving hard to stabilise the oil market and keep crude oil prices at equitable levels that balance the market and are acceptable to both producers and consumers."
Despite the plunge in the last quarter, OAPEC's oil export earnings soared to their highest ever level of around $608bn through the year, nearly $152bn above its revenues of $456bn in 2007.
The report gave no figures on the average price of Arab crudes and the region's oil output last year but according to independent estimates, prices peaked at nearly $95 and OAPEC pumped in excess of 22 million barrels per day. Experts believe the combined Arab oil export earnings could dive under $300bn in 2009 as crude prices are projected to average below $50 a barrel and the region's oil production will likely decline by at least one million bpd following Opec's collective decision to slash supplies three times last year to offset a sharp drop in demand due to the global economic crisis.
"The decline in crude prices had a direct impact on the financial situation of OAPEC member countries, since oil revenues are the mainstay of their socioeconomic development," said the Kuwaiti-based OAPEC, which groups the UAE and nine other Arab oil exporters.
"In the last quarter of 2008, Opec adopted several resolutions to restore the market's balance. It decided to cut production by 2.2 million bpd effective from the beginning of 2009, bringing total reduction of its output to 4.2 million bpd since September 2008, which is an unprecedented level of reduction."
The report said the cuts were designed to stem the fall in prices, which could have jeopardised projects for capacity expansion and thus undermined the ability of producers to meet growing demand for oil in the medium and long term. "Producers currently face the risks of huge investments in projects to build additional output capacity that may not be required in the current economic climate. The conditions now prevailing in the oil market call for the consolidated efforts of all stakeholders in the oil industry, particularly non-Opec producers and exporters, who account for some 60 per cent of world supplies," it said.
"These countries must play a role in maintaining a stable oil market and strengthening co-operation with Opec countries. At the start of a new year, which conjures up depressing images of global economic performance owing to the fallout from the financial crisis and its repercussions for oil demand, OAPEC hopes its members and Opec will sail through the storm safely… it hopes the new year will bring positive changes that will benefit OAPEC members, which have spared no effort to stabilise the oil market, so that it can provide better returns on their dwindling oil resources for current and future generations."