Brent to remain between 40 and 50 dollars per barrel for a long time – Natixis

Strategists at Natixis believe Brent Oil price will remain between 40 and 50 dollars per barrel. Therefore, the most troubled oil-producing countries will be those where there is a large, chronic fiscal deficit at this oil price and those where there appears to be a large external deficit given the weight of energy exports at this oil price. 

Key quotes

“We believe the oil price (Brent) will remain between 40 and 50 dollars per barrel. This is because if the oil price falls below 40 dollars per barrel, US shale oil production declines, but a rise in the oil price above 50 dollars per barrel (for Brent) is prevented by the expected weakness of global oil demand due to the acceleration in the energy transition and the weakness of activity after the COVID-19 crisis.”

“We look at the size of the fiscal deficit when the oil price is low. We see a very large fiscal deficit when the oil price is low in Algeria, Brazil, Saudi Arabia, Iraq and Libya (also because of the armed conflict).”

“We see a very large external deficit when the oil price is low in Libya (also because of the armed conflict) and in Algeria.”

“We note a high weight of energy exports in GDP in Angola, Algeria, Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Libya and Kazakhstan.”