Bad, Bad News: Oil Prices To Drop To Between $5 And $15 In 2016 – IMF

Christine Lagarde, Managing Director, International Monetary Fund (IMF), Washington DC; World Economic Forum Foundation Board Member is seen during the Session 'The Global Economic Outlook' at the Annual Meeting 2013 of the World Economic Forum in Davos, Switzerland, January 26, 2013. | WEF/Moritz Hager

The days ahead may just be harder than envisaged as the International Monetary Fund (IMF), Thursday, said crude oil prices may slump to as low as $20 per barrel in 2016.

Following the release of the “IMF Executive Board Concludes 2015 Article IV Consultation with Iran” report, the body highlighted that the price of crude oil could drop between $5 and $15 in 2016. Following the release of the “IMF Executive Board Concludes 2015 Article IV Consultation with Iran” report, the body highlighted that the price of crude oil could drop between $5 and $15 in 2016.

According to IMF, the dwindling oil prices would not have overtly negative effect on Iran, whose gross domestic product (GDP) is expected to rise four to 5.5 percent by 2017.

“Prospects for 2016/17 are brighter, owing to the prospective lifting of economic sanctions. Higher oil production, lower costs for trade and financial transactions, and restored access to foreign assets, are expected to lift real GDP to about 4–5.5 percent next year,” IMF said.

The same cannot be said for Nigeria, whose 2016 budget is benchmarked at an oil price of $38 per barrel for the 2016 fiscal year.

With Nigeria expected to produce 2.2 million barrels of crude oil per day in 2016 and sell at $38 per barrel, the country expects to generate $83.6 million per day in 2016 – $30.514 billion in the year 2016.

Going by IMF’s predictions at $20, Nigeria would generate $44 million per day in 2016, amounting to $16.060 billion in the year.

This would mean that Nigeria would get at least 47.4 percent less revenue from oil than what is already projected, consequently adding more pressure to the nation’s need to go borrowing in 2016.