The voluntary cut in oil production announced by the State of Kuwait last week, with the participation of several producers of the “OPEC Plus” countries, led to an additional increase in the equivalent price of a barrel of oil in the state’s general budget for the fiscal 2023-2024 by 4.8 percent (during the estimated production cut period from May to December 2023) to about $98 per barrel, after it was $92.9 before the cut.
What is reflected in the rise in the price of a barrel of oil in the budget in the form of runaway expenditures or their inflation goes beyond the decline in the ability of the main source of wealth in the country to overcome the budget to the stage of fiscal deficit, even with the presence of exceptional support factors such as the voluntary reduction of oil production amounting to 1.6 million barrels per day, and Kuwait’s share of it is 128 thousand, reports Al-Jarida daily.
A barrel, with which “OPEC Plus” surprised the world, or with the continuation of the Russian-Ukrainian war, and its repercussions on energy supply lines, or even stopping the export of crude oil from Iraqi Kurdistan to Turkey after the decision of the arbitral tribunal of the International Chamber of Commerce in Paris ruled that the export from this region was illegal without the approval of the Baghdad government, before the signing of an agreement between the two parties last week.
If expenditures are not reconsidered, controlled and restructured, the reform approaches of some ministers have no value with the reduction in oil production at the beginning of this month, which is the beginning of the current fiscal year, the price of a Kuwaiti oil barrel increased by 9.5 percent, to reach $86.6 a barrel, (last Tuesday).
There are other pressure factors, the first of which is anticipation of the reaction of oil consumers, especially the United States, towards the sudden reduction of OPEC Plus production, which may lead to a shift in the threat with the approval of the “NOPEC Law”, which considers OPEC as a monopoly, to a law enforceable with all the consequent financial and tax penalties, in addition to the impact of the bleak future forecasts for global economic growth negatively affecting the demand for oil, the latest of which was the World Bank’s reduction of its forecasts for global economic growth for the 2023 from 2 percent to 1.7 percent, in parallel with the International Monetary Fund presenting the weakest forecast for global economic growth since 1990, as it is expected that the global growth rate until 2028 will not exceed 3 percent annually.
This is in addition to its expectations of reducing average crude oil prices this year by 24 percent from current prices, down to $73 per barrel of oil and $69 per barrel next year 2024 due to fears that control global economic growth.
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