MUSCAT, April 24 - On the back of continuous rise in international oil market, Oman crude price crossed the $70 per barrel mark for the first time in three years on Tuesday. “The price of oil for Oman’s June 2018 delivery rose to $71.32 per barrel compared to $70.27 the day before,” said a statement by Dubai Mercantile Exchange (DME). The recorded rise was $1.05 in a single day, leading to the largest price per barrel since 2015. “It is a very supportive tool at this point of time that the rise in oil revenue will support the government’s fiscal policy and foreign exchange reserves,” said Lo’ai B Bataineh, Chief Executive Officer at Ubhar Capital.
According to him, the falling deficit as a result of the rising revenue will definitely help the economy with rating improvements. “The rising crude prices will further strengthen the Omani economy and result in a surplus budget in the current year,” said Syed al Mamri, a financial expert with a local bank. The International Monetary Fund (IMF) in a recent report said Oman’s fiscal deficit will sharply decline to below four per cent of gross domestic product (GDP) in the next two years.
“Preliminary budget execution data point to a significant improvement in the fiscal position last year, on the back of higher oil prices and spending restraint,” the report said. The IMF forecast that the Sultanate will register the highest growth rates in GDP among the GCC states in 2019.
In its report titled ‘Economic Outlook for Middle East’, the IMF forecast that the Sultanate will post the highest growth rate in GDP with 4.2 per cent followed by Kuwait 3.8 per cent, UAE 3 per cent, Bahrain 2.3 per cent and Saudi Arabia 1.7 per cent.
The government has made progress in curtailing both current and capital expenditure, helping reduce the breakeven fiscal oil price. “Combined with a large increase in oil revenues, this brought the overall deficit down to around 12.8 per cent of GDP from 21 per cent of GDP in 2016,” the report said.
The increase in the price of Omani oil followed a global trend that has saw Brent crude rising for sixth day on Tuesday, passing $75 a barrel on expectations that supplies will tighten in the coming days.
“Continued fears about potential US sanctions on Iran kept the oil rally going strong on Tuesday, sending prices higher for the sixth straight day,” said a report.
Brent crude futures surpassed $75 per barrel briefly during the Asian morning session, to a high of $75.20 before falling slightly.
The report said that the US has until May 12 to confirm whether it will be withdrawing from the Iran nuclear deal.
“A withdrawal would likely bring additional sanctions against Iran and could push oil prices up as much as $5 per barrel,” said the report.
“Crude prices are now sitting at the highest levels in three years, reflecting ongoing concerns around geopolitical tensions in the Middle East, which is the source of nearly half of the world’s oil supply,” ANZ bank said.
Opec’s efforts to tighten markets are being led by top exporter Saudi Arabia, where state-controlled oil firm Saudi Aramco is pushing for higher prices ahead of a partial listing planned for later this year or 2019.
SAMUEL KUTTY
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