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Fitch: Collapse of oil prices harms GCC revenues

March 10, 2020 at 12:19 pm

Credit rating agency Fitch said yesterday that the collapse of oil prices will put pressure on the financial revenues of the Gulf Cooperation Council (GCC) countries.

Fitch senior sovereign analyst for the Middle East and Africa, Jan Friedrich, said a $10 drop in crude prices lowered fiscal revenues in the Gulf by 2-4 per cent of GDP, depending on the country.

The agency said the fiscal breakeven prices for all Gulf sovereigns are far higher than the $35-a-barrel price that Brent reached yesterday.

Friedrich explained that the fiscal breakeven price is above $80 per barrel for Bahrain, Oman and Saudi Arabia. “However, at least the higher-rated sovereigns, particularly Kuwait, Qatar and Abu Dhabi, have ample buffers, mainly in the form of sovereign wealth funds,” he added.

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The Gulf Cooperation Council, whose countries rely heavily on oil and gas revenues, includes Saudi Arabia, the United Arab Emirates, Kuwait, Bahrain, Qatar and the Sultanate of Oman.

According to the International Monetary Fund (IMF), $64 a barrel was the breakeven price for the GCC countries over the past year.

Qatar had the lowest breakeven price among GCC countries in 2019 with $48.8 a barrel and about $45.7 in 2020 while Bahrain had the highest price of $95.14 a barrel.

Crude oil prices collapsed by 29 per cent at the start of weekly trading yesterday, reaching their lowest levels since 2016 as a result of the oil price war that Saudi Arabia and Russia started.