The year 2025 starts with several positive developments for the Algerian economy. While oil and gas prices are on the rise, the dollar is strengthening against the euro.
This exceptional alignment of economic factors benefits Algeria, which exports hydrocarbons in dollars while settling most of its imports in euros.
Increase in Gas Prices in Europe
The cessation of Russian gas deliveries through Ukraine has caused gas prices to surge in European markets. Gas ended 2024 above the symbolic threshold of 50 euros per megawatt-hour, the highest since October 2023. During the same period last year, gas was valued at only around 30 euros per megawatt-hour.
This significant price increase has been attributed to various factors including the war in Ukraine, an unexpectedly colder winter, and Europe’s increasing reliance on more expensive American LNG compared to Russian gas supplied via pipelines.
In October of last year, Algeria became the leading gas supplier to the European Union, with exports valued at $1.3 billion for that month alone, accounting for 21.6% of EU gas imports. Algerian gas supplies primarily go to Italy and Spain via pipelines, and to France via LNG.
Algeria, which produced 105 billion cubic meters of gas in 2023, aims to double that to 200 billion by 2028. In December 2022, President Abdelmadjid Tebboune called for doubling Algerian gas production, which was then just over 100 billion cubic meters, with half intended for export. By December 2023, the state-owned oil company Sonatrach announced a $50 billion investment program through 2028, with $36 billion dedicated to exploration and production to enhance its gas and oil production and export capabilities.
Oil Prices at a Two-Month High
Oil, Algeria’s other primary resource, is also seeing price increases. On Monday, January 6, the Brent crude oil barrel, a benchmark for Algerian oil, was priced at $76.26 after nearing $77 in trading sessions. This is the highest oil has been in two months, driven by positive economic forecasts for the U.S. and China, along with a reported decrease in U.S. oil stocks on January 1.
Analyst Stephen Schork from Schork Group, cited by specialized agencies, suggests that the market is also excited about the prospect of a new U.S. government that is clearly supportive of oil and gas.
Euro Falls Against the Dollar
Alongside rising hydrocarbon prices, the euro has weakened against the dollar. On Thursday, January 2, the euro hit its lowest against the dollar at $1.026. Since its peak in September at $1.1196, the euro has lost 9% of its value. The euro-dollar parity is now within close reach.
For Algeria, this is yet another piece of good news as most of its imports are settled in euros, while its exports, primarily oil and gas, are in dollars.
Since 2022, Algeria has been recording a trade surplus. In 2023, exports reached $55.5 billion, with $50.4 billion from hydrocarbons, according to a report from the Bank of Algeria published in August last year. Imports for the same year were $42.84 billion.
Expected Economic Impacts
The combination of these positive factors – rising gas and oil prices and a stronger dollar – should directly and immediately affect Algeria’s main economic indicators. Expected outcomes include an increase in trade surplus, foreign exchange reserves, and public treasury due to higher petroleum taxes. However, to remain insulated from fluctuations in global oil markets, Algeria needs to increase non-hydrocarbon exports. In the first quarter of 2024, these exports barely exceeded $1 billion, far from the government’s goal of surpassing $10 billion annually.
In 2021, the drop in oil prices led to a historic low in Algerian hydrocarbon exports, totaling only $22 billion.
