Streets paved with black gold
Oil prices broke the $80 barrier this week. Is it too early to be optimistic about the region’s recovery process?
October 20, 2009 1:11 by Dana El Baltaji
Last year’s unprecedented drop in oil prices, from $147 in July 2008 to roughly $32 in December, stalled the Gulf’s ambitious development plans, forcing GCC States to lower readjust their 2010 budgets and oil price forecasts.
Oman settled on a forecast of $50 a barrel, while Iraq announced it based its 2010 budget on an average oil price of $62. Qatar’s oil price forecast for 2009/2010 – the nation’s fiscal year ends in April – was $40, and Kuwait, which has yet to make an official announcement, is expected to settle on a ultra-conservative estimate of $35 for both 2010 and 2011.
The remaining GCC nations – Bahrain, the UAE and Saudi Arabia – have not announced their 2010 oil price forecast.
The recent rally in oil prices, then, is likely to raise hopes that the region may recover from the financial crisis sooner than expected. But we’re just being optimistic. The reality is that once the fundamentals kick in, the market may continue to suffer from falling oil demand.
However, if oil were to remain close to the $80 mark, Gulf States will likely grow 5.2 percent in 2010, according to a report by the International Monetary Fund (IMF)
The IMF based its forecast on an average oil price of $76.5 a barrel.
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