Qatar and Kuwait have lower breakeven oil prices compared to average oil prices YTD (year-to-date), Kamco said in a report.
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Fiscal breakeven – which is the oil price needed to balance the budget – published by the International Monetary Fund for 2019 for all the Gulf Co-operation Council (GCC) countries remain below their corresponding 2018 estimates,
“Nevertheless in 2019, stable oil prices would be crucial for the GCC to keep GDP (gross domestic product) growth intact and for the region to maintain its favorable balance of payments and fiscal manoeuvrability,” it added.
Highlighting that IMF’s oil production target for 2019 likely to be revised lower post Opec+ meeting in Vienna; Kamco said the oil production estimate for the GCC was raised by the IMF for 2018, ascribed to the production increase from Saudi Arabia (+166tb/d), the UAE (+87tb/d) and Kuwait (+39tb/d) in 2018, as the Opec+ increased production since June-2018.
“We do see the possibility of downward revisions to the IMF’s 2019 oil output estimate for the GCC region, given that the market expects the Opec+ meeting in Vienna next month to result in an extension of production cuts into 2019. Separately, the GCC oil exports also followed a similar trend and were pushed up as compared to in May-2018 estimates,” it said.
Oil exports from the region were raised from 12.55mb/d to 12.56mb/d for 2018. The export estimate for 2019 was increased from 12.93mb/d to 13.24mb/d, likely considering the higher production volumes, according to Kamco.
As oil prices are down more than 20% from the highs of the year, the market expects Opec+ to decide in December 2018 on continuing oil production cuts in order to support oil prices.
Kamco expects the IMF’s real oil-GDP estimates for the GCC in 2019 to be “too optimistic”, as the forecast for 2019 currently factors in an oil production growth of 0.58mb/d from 2018, leaving potential for downward revisions.
“However, we expect the GCC to continue its fiscal rebalancing, and diversification efforts to boost the non-oil economy and private sector growth,” it said.
According to Washington-based Institute of International Finance, Qatar’s fiscal and external breakeven oil prices are expected to be $60 per barrel and $44 per barrel respectively this year.
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