We noticed you're blocking ads.

Keep supporting great journalism by turning off your ad blocker.

Questions about why you are seeing this? Contact us

Font Size

- Aa +

Mon 20 Oct 2008 04:59 PM

Font Size

- Aa +

$79 oil will still bring Gulf budget surpluses - report

Standard & Poors says oil exporters' balance sheets should remain robust in 2009.

Gulf Arab oil exporters should continue to post budget surpluses if oil prices average $79 a barrel in 2009, but regional budgets would suffer from any sustained sharp drop in crude, Standard & Poors said on Monday.

Producers' group OPEC will be looking into a possible oil output cut at an emergency meeting this week, to shore up prices that have fallen by half in three months from a record high above $147 a barrel in July. Oil rose above $74 a barrel on Monday.

Expectations that a global recession will hit energy demand in the west and Asia, as well as the US dollar's recent strength, have toppled crude prices.

"Our analysis highlights the robustness of Gulf government balance sheets in the face of severe negative oil price shocks," S&P said in a research note.

Top oil exporter Saudi Arabia and its neighbours in the world's biggest oil-exporting region are nonetheless "vulnerable" to oil price fluctuations, the ratings agency said.

If oil prices average $79 a barrel in 2009 from an expected $108 this year, Gulf public finances would "remain solid" and most regional countries will continue to post surpluses, S&P said.

As oil rallied as much as seven-fold in the last six years, Gulf states created "substantial asset cushions", while also pouring windfall revenues into infrastructure and industry projects designed to wean them off of a reliance on energy exports.

Still, if oil falls below $40 a barrel and remains at that range through to 2015 -- a worst case scenario - the Gulf, with the exception of Abu Dhabi, would "run large fiscal deficits", S&P said. (Reuters)

Arabian Business: why we're going behind a paywall

Real news, real analysis and real insight have real value – especially at a time like this. Unlimited access ArabianBusiness.com can be unlocked for as little as $4.75 per month. Click here for more details.
SR 11 years ago

I think the oil producers will have to be realistic and try to cut production so that prices can be maintained. Anyway demand would slow down and sustain over the medium / long term as the global trend is towards energy efficiency / alternative energy. Future will be more about hybrid cars, solar power etc. etc.