Which states to be net beneficiaries of OPEC deal?
Baku, Azerbaijan, May 26
By Leman Zeynalova – Trend:
Despite lower oil production, the Gulf economies should continue to be net beneficiaries from the OPEC agreement, at least in the near-term, says an analysis done by the UK-based consulting company Capital Economics.
OPEC held its 172nd meeting on May 25, followed by the 2nd OPEC and non-OPEC ministerial meeting in Vienna, Austria.
OPEC member countries and non-OPEC parties, Azerbaijan, Kingdom of Bahrain, Brunei Darussalam, Kazakhstan, Malaysia, Mexico, Sultanate of Oman, the Russian Federation, Republic of Sudan, and the Republic of South Sudan have agreed to extend the production adjustments for a further period of nine months, with effect from July 1, 2017.
The reductions will be on the same terms as those agreed in November.
“Despite the decision to rollover the cuts, policymakers in the Gulf are averse to taking bolder action. Indeed, while there had been speculation that OPEC may consider deeper production cuts, some delegates said that this was never even on the table,” said the analysis obtained by Trend.
The analysts believes that Gulf countries seem concerned that such action could prompt US shale producers to raise their output further and grab market share.
“What’s more, these countries are keen to avoid a repeat of the 1980s, when OPEC got caught up in a cycle of ever-deeper cuts that did little to boost oil prices and hit economic growth hard,” said the consulting company.
Higher oil prices should more than offset the impact of lower production on the Gulf region’s oil receipts, according to the analysts.
“On this basis, we estimate that the Gulf’s oil export revenues will be around $55 billion (4 percent of GDP) higher this year than they were in 2017,” said the report. “Higher oil receipts, combined with the fiscal austerity implemented over the past few years, should help to narrow budget and current account deficits – some may even return to surplus.”
The pace of fiscal consolidation is likely to be eased further and there are already signs this has fed through into stronger growth in the region’s non-oil sectors, according to the consulting company.
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