According to S&P, Saudi Arabia, one of the largest oil producers, is preparing to increase its fossil fuel production even as global demand for energy continues to fall due to the coronavirus pandemic.
If this happens, oil-producing countries that depend largely on oil revenue to fund their fiscal budget may be in trouble.
They may need to revise their budgets to contain the shock from the COVID-19 pandemic.
Ghana may also lose more than the projected 53% of oil revenue that the African Centre for Energy Policy anticipates.
ACEP had forecast revenue of $743 million from crude oil sales this year, as against earlier $1.567 billion projection, anchored on a price prediction of US$62.61 per barrel.
ACEP’s review of the revenue projection is based on the average price prediction of US$40 per barrel for crude oil in 2020.
Analysts believe the world’s oversupply of oil is expected to balloon next month when an agreement between OPEC and Russia to hold back oil production is due to end.
The collapse of the deal allows Saudi Arabia, Opec’s de facto leader, to race Russia to increase oil production in a bid to grab a greater share of the market.
The UK Guardian reports that the oil price war is expected to raise the world’s oil production by more than 2.5 million barrels of oil a day, which would outpace demand for crude by 6 million barrels of oil a day.
Meanwhile, fuel prices at the pump have gone down marginally.