Higher oil prices offer temporary relief but could stall reforms

GULF COUNTRIES - Forecast 09 Mar 2021 by Justin Alexander

Higher-than-expected oil prices are great news for the Gulf, particularly the weaker sovereigns, and deficits should be lower than originally feared; in the most bullish case even Saudi Arabia could achieve a surplus. However, even then, Oman, Bahrain and Kuwait would still have significant financing needs this year. We see oil averaging below $60, which would mean only Qatar would break even, and remain weak medium term. We have updated our GCC breakeven forecasts based on budgets and the latest oil production outlook to clarify where each state stands. The longer oil remains well above budgeted levels, the greater the risk that consolidation efforts could stall.

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