Oil price, Gulf monarchies keep their stance

They count on previuos surplus. Oil plunge helps 'recovery'

27 January, 12:50

    GCC Oil ministers meet in Riyadh GCC Oil ministers meet in Riyadh

    (ANSAmed) - DUBAI - The constant decline of oil prices, which have halved since last June, does not worry Arab monarchies that can fall back on the large surplus accumulated in previous years to keep their economies viable. On January 20 the price of crude oil reached its lowest level since September 2010: 46.49 dollars a barrel.

    Six months ago, a barrel was worth 120 dollars.

    According to estimates, the plunge will affect oil exports considerably, going from 743 billion dollars in 2012, to a meager 140 dollars of 2015.

    At current production levels, the gross internal product of Gulf Cooperation Council countries (GCC) - Saudi Arabia, Qatar, Kuwait, Bahrain, United Arab Emirates and Oman - will be marked by 3.4% growth in contrast to the 4.1% of 2014.

    The fiscal budget will slide from a 4.8% surplus in 2014 to a 2.1% deficit in 2015.

    In any case, the block has no intention of turning back. "The decision not to cut production taken in November at the Opec meeting is the correct one" said Emirati Energy Minister, Suhail Mohammad al Mazrouei, Monday. " The market needs to stabilize itself. It's a good thing for global economy, it's good for China, It will boost growth". The situation will be assessed once again in June, added Al Mazrouei, echoing the Emirati minister of the Economy who told Gulf News today: " oil prices will not go down for much longer, half way through the year there will be a reversal spurred by positive economic change in Europe the Us and China". Financial analysts agree that the spending capacity of the six sisters should not be tied to current oil prices, not in the short term anyway. These countries have surpluses that will allow them to weather market instability for many months. According to a study conducted by investment bank VTB Capital oil sales at a price point around 60 dollars a barrel would still allow them to withstand public spending for another 2 to 5 years. The weakest sovereign funds at the moment belong to Oman and Bahrain. Many Gulf leaders have already stated that economic development spending will not be cut, nor will investments in the oil sector notwithstanding possible delays. Gulf Cooperation Countries benefit from low debts and the consolidation of foreign assets, their financial standing is much more solid than in the '80 and '90, report financial analysts, stressing nonetheless that current conditions may still lead to fiscal adjustments.

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