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Middle East: Fiscal breakeven levels are still out of reach
Feb 12: The trajectory that the breakeven oil price takes in the Middle East is an important barometer not just for oil industry analysts but for political watchdogs as well.
8For the Gulf as a whole, the external breakeven price has declined from an average of $62/bbl to $49 in 2017.
8The external breakeven oil prices are the oil prices that cover the import bill of a hydrocarbon-exporting economy and at which the current account is balanced.
8For Saudi Arabia, the price has fallen from $73 in 2014 to $45 in 2018 in Saudi Arabia Kuwait's external breakeven oil price however went up to $43/bbl to $52 in 2018.
8The price is expected to keep going down as non-oil revenues rise and public expenditure is cut
8But the point to note is that the external breakeven point is not the same as the fiscal break even level, when the price of oil equals the total expenditure of the government.
8In this context, it projected that the fiscal breakeven oil price in Bahrain will decrease from $116 in 2014 to $96 in 2018, while falling from $103 in 2014 to $82 in 2018 in Oman, regressing from $106 in 2014 to $74 in 2018 in Saudi Arabia and dropping from $83 in 2014 to $62 in 2018 in the UAE
8On the other hand, Qatar's fiscal breakeven oil price will rise from $54/bbl in 2014 to $60 in 2018.
8Unless the fiscal breakeven point is reached, these countries will continue to burn their foreign exchange reserves to fund their economies
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