Lowest oil price in last 18 years
Arabian Gulf: The price of Brent crude oil fell to less than $23 a barrel on 30 March, its lowest level since November 2002.
The grounding of planes, lockdown of public transport and many companies closing operations has resulted in the oil price falling to $22.58 a barrel, below levels reached in the global financial crisis of 2008.
The collapse of the Opec+ oil production cut alliance in early March, and the subsequent ramp up in production from Saudi Arabia and Russia, has exacerbated the problem.
The drop in oil price is already starting to have significant repercussions in the Gulf region, with hydrocarbons contributing to about 91 % of government revenue for the GCC (Gulf Cooperation Council) and Iraq, and contributes about 40 % of GDP.
Earlier this week, S&P Global Ratings downgraded its sovereign credit rating for Oman and Kuwait as a result of the economic impact of the Covid-19 virus outbreak and falling oil prices.
While S&P affirmed its long and short term credit ratings for Bahrain, it revised its outlook for the country down to stable from positive as a result of the fall in oil prices and predicted increase in current account deficits.
In spite of the sharp drop in oil price, S&P affirmed its credit ratings for Qatar, Saudi Arabia and the UAE.
For Saudi Arabia, the region’s largest economy, S&P said its strong net asset position on both fiscal and external balances continues to offer strong ratings support. However, it said that a prolonged drop in oil prices would weaken its net asset stock and put pressure on ratings.
Source: Energy & Utilities