The price of Omani oil reached a three-year high, crossing $69 per barrel for the first time in three years.
According to the Dubai Mercantile Exchange (DME), the price of oil for Oman’s June 2018 delivery rose to $69.08 per barrel compared to $68.66 the day before. The recorded rise was 46 cents in a single day, leading to the largest price per barrel since the recent oil glut began in 2015.
Financial experts in Oman anticipate the rise will bode well for the Sultanate’s economy.
Alkesh Joshi, a Partner at professional services firm Ernest & Young Oman, said, “I think this will have a very positive impact on the economy from two counts. One is of course, the revenue from the government will certainly get a boost which will in turn lead to better management of the country’s fiscal deficit. At $45 a barrel is the price that Oman’s fiscal budget for 2018 was prepared and in that, there is a OMR3 billion. So a significant increase in the price of oil is going to have a very positive impact on the country.”Business Advisor Dr. Anchan C.K. said, “It’s revival time for the economy, particularly for investors expecting steady growth, at $69.08 per barrel, we are nearing the Oman’s rationalised break-even price – around $70.
The International Monetary Fund (IMF) recently estimated the deficit to gross domestic product ratio at 11 per cent for 2018. However, with the oil at $69.08 per barrel level, it will reduce this ratio too.
The predicted increase in oil prices and the expansion of the non-oil economy will improve the macroeconomic outlook, the fundamentals are strong, and as global supply dips and demand increases, there is a synchronized rebound in the oil market.
The private sector will once again begin investing in oil and gas projects and liquidity will slowly creep back in to the market. The prices of oil show that we should be geared up and ready for an upbeat in the economy very shortly.”
The rise in the price of Omani oil follows a global trend that has saw Brent crude gain 5.7 per cent this week, rising to $71.34 a barrel on Tuesday, the highest since late 2014, although the price has since fallen back and was $70.98 a barrel by 0907 GMT, down 6 cents. U.S. crude futures were at $65.55 a barrel, up 4 cents on the day.
Oil held near its highest in nearly three years on Wednesday, supported by political tension in the Middle East, although evidence of rising U.S. crude supply acted as a counterbalance.
The United States and its allies hit Syrian President Bashar Al Assad’s forces following a suspected poison gas attack last weekend.
Syria is not a significant oil producer, but any sign of conflict in the region tends to trigger concern about potential disruption to crude flows across the wider Middle East, home to some of the world’s biggest producers.
There are also concerns that the United States could renew sanctions against Iran.
“The focus right now is on the repercussions of military strike against Syria,” Commerzbank head of commodity research Eugen Weinberg said.
“We think the fundamentals do not justify the current price, but unfortunately, the market is focusing more on the politics and ignoring some of the warning signs, especially the hike in U.S. oil production.”
“We have upped our Brent forecast to $67.50 a barrel, from $66 in our last price update in February. We see price risks to the upside on geopolitical risk,” corporate investment banking company Natixis said in a note.
-Times of Oman