Magazine article The Middle East

Oil Prices Forecast to "Stay Lower Longer"

Magazine article The Middle East

Oil Prices Forecast to "Stay Lower Longer"

Article excerpt

Moody's futures agency has downgraded its oil price forecast indicating more pressure will be put on the economies of the oil producing nations of the Gulf

With oil prices expected to stay lower for longer, Gulf Cooperation Council (GCC) governments' fiscal and current account balances will remain under pressure, a new report by ratings agency Moody's Investors Service has found. The report came after the agency revised its oil price forecast this week, projecting that recovery will take place in 2017 rather than in 2016 because of slower growth in demand and faster increase in supply.

It expects brent crude to average $55 per barrel in 2015 and $53 per barrel in 2016 before gradually recovering to $60 per barrel in 2017. That is compared to its previous forecast of $65 per barrel in 2016 and $80 per barrel in 2017.

"We expect the fiscal positions of all GCC countries to worsen in 2015, barring significant changes to oil production, planned expenditure or non-oil revenue sources, and project deficits in 2016 for all GCC members except Kuwait," Moody's said.

Aggregate nominal hydrocarbon gross domestic product for the Gulf states fell by 11 per cent between 2012 and 2014 to $705bn. The aggregated fiscal surplus also dropped from around 14 per cent of regional GDP to 4 per cent during the same period, the report found.

Moody's expects the GCC region will post a combined fiscal deficit of close to 10 per cent of regional GDP in 2015 and 2016, compared to an average aggregate surplus of almost 9 per cent between 2010 to 2014. …

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