Developing countries’ oil and gas income could fall to their lowest levels in more than two decades if current energy market conditions persist, the IEA and OPEC have warned in a rare joint statement.
IEA Executive Director Fatih Birol and OPEC Secretary General Mohammed Barkindo expressed “deep concerns” about the coronavirus pandemic on Monday, warning it could have “potentially far-reaching economic and social consequences.”
Birol and Barkindo said they expect developing countries to see their oil and gas income fall by 50% to 85% in 2020.
They singled out public sector spending in vital areas such as health care and education as being especially vulnerable.
International benchmark Brent crude traded at $29.91 Tuesday morning, down around 0.7%, while U.S. West Texas Intermediate (WTI) stood at $28.98, more than 1% higher.
Oil prices slid 10% in the previous session, as the coronavirus continues to spread worldwide and amid an ongoing price war between OPEC kingpin Saudi Arabia and non-OPEC leader Russia.
Crude futures have more than halved since climbing to a peak in January.
On Monday, Saudi Arabia’s state-owned oil giant Saudi Aramco said it would likely continue with a planned oil production hike from April into May, reportedly suggesting it was “very comfortable” with an oil price of $30 a barrel.
Russia, which refused to sign up to OPEC’s proposal of deeper production cuts earlier this month, has claimed it can withstand lower oil prices for as long as a decade.
OPEC’s Barkindo and the IEA’s Birol did not address Russia specifically in their joint statement, but both “underscored the importance of market stability, as the impacts of extreme volatility are felt by producers.”
They agreed to “remain in close contact on the matter” and continue their regular consultations on oil market developments.
The IEA, which advises industrialized nations on energy issues, has previously warned long-time allies of de facto OPEC leader Saudi Arabia could be the worst hit from a sharp drop in oil prices.
Last week, Birol told CNBC that countries like Iraq, Algeria and Nigeria — all OPEC producers — were in a “very, very difficult situation” and would require support from the rest of the world.
Iraq, OPEC’s second-largest producer, is thought to be particularly exposed to an all-out price war because it has one of the least diversified economies of the producer group — despite relatively low production costs.