BAKU, Azerbaijan, Oct.27
By Leman Zeynalova – Trend:
The latest OPEC oil production figures continue to show that several countries are overproducing, which is making Saudi Arabia – which has borne the brunt of production cuts – increasingly frustrated, Trend reports with reference to Capital Economics research and consulting company based in the UK.
“For now, at least, countries are making compensatory cuts (although it’s not clear if some of the serial non-compliers like Nigeria and Angola will continue to do so). In the near term, we doubt that Saudi would revert to its previous policy of raising oil output to regain market share. Indeed, rumours suggest that the deal to cut output could even be extended beyond January (when quotas are set to ease). While that might support prices, it would prolong the drag exerted by oil sectors on overall GDP growth.
“The COVID-19 outbreaks in Morocco, Tunisia, Jordan and Lebanon have continued to worsen, prompting authorities to tighten restrictions to slow the spread of the virus. With the composition of these economies being composed to a larger degree of sectors vulnerable to social distancing measures, the stricter measures will have a particularly damaging effect on economic recoveries.
“Saudi Arabia’s economy contracted sharply in the second quarter of the year, which came as a result of the impact of OPEC+ production cuts and COVID-19 restrictions weighing on the economy. But, even as restrictions have been lifted, the economic recovery has stuttered.
The UAE’s largest construction firm, Arabtec, filed for liquidation this month and raised fresh concerns about the debts of Dubai (where Arabtec is listed) and its government-related entities. In Qatar, Q2 GDP figures showed that the economy shrunk by just over 6 percent y/y, but more timely figures have shown a strong recovery compared with the rest of the region.
“Across the rest of the Gulf, Kuwaiti Emir Al-Sabah passed away this month and was succeed by Sheikh Nawaf, who needs to overcome an ineffective parliament to pass the long-awaited debt law. Oman’s government has taken swift action to address deteriorating public finances through a new debt issuance and bringing forward the introduction of VAT,” reads the report released by the company.
---
Follow the author on Twitter: @Lyaman_Zeyn