A Kuwaiti oil analyst said that Kuwaiti oil barrel has lost more than $90 of its price, dropping below USD 20 for the first time since January 2002. Analyst Mohammad Al-Shatti said that the pumping of Iranian oil into the market, expected in February 2016, will have a negative effect on the price of oil this year.
He stated that the main reason for the weakness in oil prices was due to the increase in oil supplies which were from outside of OPEC. He added that the moderate winter season in the United States and Europe also contributed to the weakness in global oil demand, noting that the slowdown in Chinese economic also was a factor in the current price of oil.
In 2016, Al-Shatti predicted that global oil demand would increase by 1.25 million barrels per day while the supplies from outside of OPEC will fall for the first time in years by 480,000 barrels per day. The price, though expected to be low during most of 2016, will gradually increase in the fourth quarter especially for the Brent mix which is expected to hit between $30-60 per barrel.
Kuwait’s Amir Sheikh Sabah al-Ahmad Al-Sabah told Editors-in-Chief including Kuwait Times Editor-in-Chief Abd Al Rahman Alyan on Wednesday that the Gulf country plans to cut subsidies on fuel and power in a bid to offset a fall in oil revenues. “We will lift subsidies and will raise the prices of petrol, electricity and water” and reduce subsidies for other services.
Kuwait is the only member of the six-nation energy-dependent Gulf Cooperation Council (GCC) that has not hiked the prices of petrol and power after income from oil plunged. Saudi Arabia, the United Arab Emirates, Qatar, Oman and Bahrain have either hiked or liberalized fuel and power prices, saving billions of dollars. The Amir did not give any timeframe for the measures.
Last year, Kuwait liberalized the prices of diesel and kerosene. The government has allocated around $7 billion in the 2015/2016 budget for fuel and power subsidies. A similar amount is earmarked for other forms of subsidies and social aid.
The Gulf state has posted a budget surplus in each of the past 16 years, accumulating fiscal reserves in excess of $600 billion. But Kuwait is projecting a deficit of $23 billion in this fiscal year, which ends March 31.
The price of oil, which contributes around 94 percent of Kuwait’s revenues, has lost three quarters of its value since mid-2014. The price of Kuwaiti oil has slumped to just $19 a barrel. The emirate has a native population of 1.3 million and is also home to about 2.9 million foreigners.