Some of the experts argued that the six Gulf nations had planned their 2009-10 budget maintaining oil prices at an average of $45-55 a barrel, therefore, taking into account the month-long stable oil prices at $50/barrel would in fact record marginal surplus rather than deficit budgets. Although EIB had warned of a deficit budget, they had ruled any possibility of 1990’s situation that inflicted heavy debt and low assets among the GCC member states. The reason cited is that they had accumulated huge financial reserves since last five years owing to a steady increase in oil prices, and particularly the first quarter of last year when the prices skyrocketed to reach the all time high of $147/barrel.

In 2008, though GCC member states estimated a budget surplus of $32bn, they amassed about $190bn surplus since the oil prices averaged at $95/barrel throughout last fiscal. Experts pointed out that if at all any member in the GCC to fall short of a surplus would be Saudi Arabia, because it produces almost a third of the total output of the region to make it the biggest loser or gainer while the prices fluctuate. As an OPEC member, Saudi Arabia along with other members had cut oil production several times since last November to halt the slide in oil prices, and the current production stand at 8.2mn barrel/day from last year’s high of more than 9mn bpd.

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Industry observers said though the intra-day trade saw marginal dip in oil prices, however early next month would see further slide before OPEC’s likely production cut on March 15. Nevertheless, they further predicted that the traders were expecting an increase in demand by April in view of lower stockpiles to spark off demand, and a gradual price rise would follow until it stabilized at $60 per barrel by September this year.

Due to the sliding oil prices, most of the companies are reluctant to increase their inventory expecting the prices to fall further and avoid losses. But by April, the depleting stockpiles are likely to prompt the buyers to increase their inventory, and the trend is expected to push oil prices up despite receding global demand.

In its latest monthly report on Wednesday, the Paris-based IEA stated the forecast for global oil demand was revised down by 570 kb/d to 84.7 mb/d in 2009 (-1.1 percent or -1.0 mb/d year-on-year) after the IMF again slashed its GDP growth prognosis to half a percent. The worsening global slowdown was blamed to be the reason for them to crimp the oil guidance further, the report added.

According to sources, the US crude oil inventory unexpectedly fell by close to 2mn barrels.
However, the lower demand due to the US economic crisis has weighed down against their reduced supplies severely. Similarly, the reports from China, the second largest oil consumer after the US have also shown the crude imports dropping by 8 percent, a lowest level in 15 months despite showing marginal increase in domestic demand.

The diminishing demand for naphtha, a by-product of crude which is primarily used as a feedstock for the production of plastic and synthetic fibres has also contributed to the price fall. The IEA warned the lower oil prices were forcing many companies to postpone or cancel many exploration and production projects which would ultimately make a huge dent in supplies when the global economy turned around. Nonetheless, analysts deduce that reaching the high of $147 per barrel once again is most unlikely as governments and companies are investing more on renewable energy sources owing to the fears of higher oil prices and climate change.

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