The prevailing oil prices, above $80 per barrel, will help reduce economic pressures in the region while high-interest rates and financing costs continue to increase, weighing on the economy.
It may be noted that the State Budget 2023 has been based at $55 per barrel while the monthly average price of the Oman Crude contract has been around $74.78 per barrel. Since July 13, Oman crude has been trading at above $80 per barrel.
Market expert Daniel Takieddine, CEO, of MENA BDSwiss, said, “Oil prices have been able to rebound to a certain extent lately after Saudi Arabia and Russia announced large production cuts.”
“While the market could continue to find support in the expectations of larger demand volumes than supply levels over the long term, production cuts have exerted an immediate upward force on prices. Expectations that Saudi Arabia could maintain its production cuts for a prolonged period could also keep prices within their current uptrend,” he added.
Takieddine said, “If GCC economies record budget surpluses we could see positive spillover effects on the whole economy and a boost in non-oil sectors’ growth. Surpluses could also help accelerate current plans to decrease the region’s dependence on oil and natural gas as well as bolster strategic development plans such as Oman Vision 2040.”
The surge in oil prices could continue well into next year when demand is still expected to outpace supply levels. This difference could also be further exacerbated if the global economy proves more resilient than previously expected.
“Chinese demand is a particularly important factor and has been a point of focus for oil traders while the Chinese economic recovery was weaker than expected until now. On the other hand, higher oil prices could help maintain elevated inflation,” Takieddine said.