Kuwait's largest bank said Tuesday, November 27 the emirate's oil revenues could fall further amid a lack of commitment by non-OPEC members to cut output, but noted that a price collapse to $10 is unlikely.
In its latest economic brief, the National Bank of Kuwait (NBK) also lowered a forecast for the price of Kuwaiti crude for next year while raising estimates of the 2001/2002 budget deficit. By November 16, Kuwaiti crude was selling for $15.70 a barrel, the lowest price since June 1999.
"NBK's forecast for Kuwaiti crude for the fourth quarter has been lowered by more than four dollars a barrel, while the forecast for 2001 as a whole has been revised downward to $21.1-21.3, almost 18 percent below that of 2000," NBK noted. It added however that the London-based Center for Global Energy Studies indicated that the possibility of oil prices dropping to $10 is remote, "given that industry stock cover is relatively low compared to 1998 when such low prices were visited."
OPEC Secretary General Ali Rodriguez warned Monday that world oil prices could collapse if measures were not taken to stabilize the oil market. The threat of a price collapse prompted the Organization of Petroleum Exporting Countries' decision to cut oil production earlier this month, Rodriguez said.
OPEC agreed to reduce its production by 1.5 million barrels per day (bpd) on condition that non-OPEC members slash their output by 500,000 bpd earlier this month. NBK said that stricter adherence by OPEC members with existing quotas could shore up the price of Kuwaiti crude to average $20 dollars in 2002.
"(But) a more likely scenario is one where OPEC does not change production," and Kuwaiti crude averages at 15.7 dollars in 2002. NBK also predicted tighter government expenditures will result in a lower budget deficit of 152 to 272 million dinars ($501.6 to 897.6 million) for Kuwait's current fiscal 2001/2002. It meanwhile expects government revenues to come in between 4.48 to 4.70 billion dinars ($14.7 to 15.5 billion), "therefore eliminating any prospect of a budget surplus for fiscal 2001/2002."
Kuwait's 2001-2002 budget projects a deficit of $5.95 billion. Expenditure is forecast at $17.18 billion and revenues at $12.48 billion, with oil income projected at $10.63 billion, or 85 percent of the total. By law, 10 percent of revenues, or $1.25 billion in this case, are deducted for the Kuwait Fund for Future Generations, a $60-billion investment managed by Kuwait Investment Authority.
Oil revenues in the budget were calculated on the basis of a conservative price of $15 dollars a barrel and daily production of about two million barrels. The budget for the 2001-2002 fiscal year started on April 1 and ends March 31, 2002. — (AFP, Kuwait City)
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)
