Dr. George T. Abed
GCC 'can meet any oil supply shortfall'
Dubai, April 18, 2012
The GCC states have spare oil production capacity now of 2.5 to 3 million barrels per day and are positioned to meet any possible shortfall in supplies to world markets, a report said.
The report by the Institute of International Finance (IIF), a leading global association of financial services firms with more than 450 member institutions, expects that average oil prices will be about $114 per barrel through 2012 with GCC oil production this year at 17.3 million barrels per day, after 16.5 million in 2011.
The institute stated that a further increase in the stock of net GCC foreign assets is in prospect to take the total to about $1.9 trillion by the end of this year, equivalent to 127 per cent of projected GDP, and then rising to around $2.1 trillion by the end of 2013.
It noted that about 60 per cent of the foreign assets of the region are managed by sovereign wealth funds.
Dr George T Abed, IIF senior counselor and IIF director for Africa and the Middle East, told a press conference in Dubai: “The prospects for the GCC are impressive, yet there are clearly risks. At a most general level, there is the issue of the impact on the GCC should turbulence in other Arab countries be prolonged.”
He emphasized: “Other risks from the sanctions on Iran indicate ambiguous outcomes. On the one hand, a large drop in Iran’s oil exports, but in the absence of a military confrontation, suggests an upside risk, since it would require significantly higher oil output from the GCC countries, raising the growth rate and lifting hydrocarbon receipts and government spending. However, an escalation of the crisis into a military conflict with Iran, even without necessarily the involvement of the GCC countries themselves, could bring about untold damage to the economies of the region, as such a conflict could easily spread.”
Dr Garbis Iradian, IIF deputy director, Africa and Middle East Department, stated: “We are forecasting some moderation in overall 2012 growth for the GCC at 4.9 per cent after the exceptional rise of 6.9 per cent last year. The average masks significant variations in prospects for individual countries. Qatar, Oman and Saudi Arabia will continue to be the strongest performers. Saudi Arabia is expected to see growth of about 5.0 per cent driven by the continued sizable increase in crude oil production and the lag effect of the sharp increase in public spending (26 per cent) of last year. The modest inflationary pressures in Saudi Arabia will persist, as they reflect local housing bottlenecks and stronger domestic demand.”
Placing oil and gas developments in the region in perspective, Dr Abed noted: “Economic
activity in the heavily oil-based economies of the six countries continues to be driven by buoyant government spending, financed by surging oil and gas revenues and setting the pace for private sector activity.
Dr Abed added: “Government spending since 2002 has grown at an average annual nominal rate of 14.5 percent, driving up the breakeven (Brent) price of oil that would balance these countries’ budgets. The breakeven prices have risen from around $30 per barrel in 2003 to $80 per barrel for Saudi Arabia and about $90 per barrel for the UAE in 2011. While for the principal oil producers in the region breakeven prices remain comfortably below prevailing market levels, the unrelenting rise in and the near irreversibility of government spending could expose the fiscal position to undue risk because of the historically high volatility of oil and gas prices.” - TradeArabia News Service
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