Amongst GCC sovereigns, UAE and Qatar are finest positioned to face softening oil worth

UAE and Qatar, among the many GCC states, are the most effective positioned to climate softening in oil costs in 2023 as they will keep exterior financing surpluses even at decrease oil costs, in response to a brand new report from Financial institution Paribas.

“Qatar and the UAE apart, we estimate the remainder of the area would require oil near $100/barrel (bbl) or above to revive an exterior financing surplus,” Mohamed Abdelmeguid, BNPP Center East and North Africa economist, stated within the report.

The financial institution sees oil costs softening to 96/bbl on common in 2023, down from $103/bbl in 2022.

“Each Qatar and the UAE can retain exterior financing surpluses at costs as little as 80/bbl − therefore we anticipate their financing positions to stay snug this yr.”

With oil worth at under $80, Saudi Arabia, Kuwait, Oman and Bahrain all must revert to financing requirement, implying borrowing must finance a fiscal or a present account hole, the report stated.

Oil is the important thing driver of fiscal steadiness fluctuations. “Each 5/bbl change within the oil worth strikes the fiscal steadiness of GCC members by roughly 1.2pp of GDP.”

Among the many funding grade sovereigns, Saudi Arabia is extra delicate to grease worth adjustments than Qatar and the UAE, whereas among the many high-yield credit, Bahrain is extra uncovered to such fluctuations than Oman.

Even with some weak point creating in 2023 oil costs, BNPP’s present projections are above the breakeven costs given under for the respective sovereigns:

  • Saudi Arabia – $77.2/bbl
  • UAE – $46.1/bbl
  • Qatar – $46.5/bbl
  • Kuwait – (FY23/24) $88.4/bbl
  • Oman – $74.6/bbl
  • Bahrain – $86.0/bbl

For reference, Brent futures is buying and selling round $87/bbl on the time of writing, in response to Refinitiv information.

(Writing by Brinda Darasha; enhancing by Daniel Luiz)

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