Welcome development: Oman Crude crosses $55/barrel for the first time in 18 months
Conrad Prabhu –
Jan 3: The price of Oman Crude rose above $55 per barrel for the first time since July 2015, buoying hopes for the sustained rebound in the fortunes of a commodity, that along with natural gas, accounts for around 80 per cent of government revenues.
The Ministry of Oil and Gas tweeted that the price of Omani crude crossed the $55 per barrel mark on Friday, settling at $55.04 for deliveries in March. This follows an increase of 26 cents per barrel over the previous high.
Contributing to the spike is global optimism that a landmark deal to cut global output by 1.8 million barrels per day, agreed by Opec and non-Opec members late last year, is beginning to take effect. Benchmark Brent crude jumped more than two per cent to a high of $58.37, up $1.55 per barrel — its highest for 18 months.
The increase is set to have a positive impact on Oman’s finances and help narrow the widening budget deficit, projected at RO 3 billion in 2017, down from a gargantuan RO 5.3 billion in 2016.
At $55 per barrel, the price of Oman crude is around 18 per cent higher than the assumed price of $45 per barrel on which the 2017 State Budget has been based. Revenue earnings above the $45 per barrel mark will be strictly set aside to help offset the yawning deficit.
“This is a welcome development, which will have positive implications for the fiscal position of Oman,” said Dr Fabio Scacciavillani, Chief Economist at Oman Investment Fund, a sovereign wealth fund of the Sultanate. “We have been predicting this upturn for some time, which is unlikely to stop at $55 per barrel,” he added in comments to the Observer.
Meanwhile, the Ministry of Oil & Gas has emphasised that the Sultanate’s pledge to cut output by 45,000 bpd, in line with a broader global agreement reached with Opec and non-Opec members, will not adversely impact the nation’s fiscal position.
On the contrary, the output cut will help shore up international prices of crude oil, with beneficial implications for stronger revenue inflows into government coffers, said Ali bin Abdullah al Riyami, Director-General of Oil and Gas Marketing.
In an interview aired on Oman TV, the official said the production cut, which effectively takes 1.8 million bpd out of global supply, will help dry up the large stockpiles of crude that are currently keeping prices low.
He stressed however that the success and efficacy of the deal is predicated on producers who have signed up to the deal, to adhere to their pledges scrupulously.
Oman, Al Riyami said, offered to cut its production, averaging 1 million bpd during 2016, by 45,000 bpd in line with a pledge to support any consensus reached by Opec and non-Opec members on measures to boost oil prices.
Oil prices have a potential to rise, as predicted by experts, to as much as $60 per barrel, if producers strictly adhere to pledges to cut output, the official said.
For its part, the Sultanate will begin cutting its output effective from March this year, and has also communicated its decision to clients likely to be affected by the measure, he added.
Oil production is projected to decline to around 940,000 bpd on average when the Sultanate operationalises its pledge to cut output by around 45,000 bpd.