Bahrain’s deficit for this year and next year could rise by up to two thirds to BD5 billion ($13.2 billion), as the oil-rich kingdom continues to feel the strain of falling oil prices, it was reported.
The deficit for 2015 and 2016 was originally estimated at around BD3 billion, but this was based on a budget based on an oil price of $60 a barrel.
With oil prices falling below $30, Shoura Council Financial and Economic Affairs Committee Chairman Khalid Al Maskati said the deficit could widen by as much as 66 percent, Gulf Daily News reported.
The concerns appeared genuine as Brent oil traded near $28 a barrel as it extended declines after international sanctions on Iran were lifted, paving the way for increased exports from the OPEC producer amid a global glut, Bloomberg reported.
Futures lost as much as 4.4 percent in London, slipping to the lowest since November 2003. “There is ongoing negative pressure on oil prices from oversupply,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. “Iran is not new, but we’ve arrived now at the point where sanctions have been removed and it’s going to be a key focus for the markets over coming weeks. The question is how much supply can come online in the short-term.”
Brent capped a third annual loss in 2015 as the Organization of Petroleum Exporting Countries effectively abandoned output limits amid a global surplus. Iran, which was OPEC’s second-biggest producer before sanctions were intensified in 2012, is trying to regain its lost market share and doesn’t intend to pressure prices with an export increase, officials from its petroleum ministry and national oil company said this month.
Brent for March settlement fell as much as $1.27 to $27.67 a barrel on the London-based ICE Futures Europe exchange and was at $28.62 at 1:16 p.m. Hong Kong time. Front-month prices declined 13.7 percent last week for a third weekly drop. The European benchmark crude was at a discount of $1.52 to West Texas Intermediate for March.
However, on a brighter note, Bahrain’s nonoil sector is forecast to see strong growth this year. The sector rose 3.3 percent in the third quarter of 2015 but is forecast to grow by 4.2 percent in the first three quarters of 2016, according to the latest Bahrain Economic Quarterly (BEQ) issued by the Economic Development Board (EDB).