High oil prices boost Gulf incomes

High oil prices boost Gulf incomes

ABU DHABI (AFP): Oil export earnings of six Gulf Arab states in the first half of 1996 hit their highest level since the oil boom of the early 1980s as crude prices climbed to a 13-year high, experts said yesterday.

Despite fluctuating crude production by Gulf Cooperation Council (GCC) countries, their revenues during the first half were the highest since 1983, they said.

"Compared with the first half of 1995, the GCC's earnings from oil sales increased by at least US$2.5 billion in the first half of this year due to the price improvement," an Abu Dhabi-based oil analyst said.

"Initial estimates showed the first half income stood at around $38 billion, the highest six-month level since the end of the oil boom," he added.

The price of OPEC's basket of seven crudes averaged $18.83 in the first half of 1996 compared with $17.40 in the first half of 1995.

Its previous highest level since the oil boom was in the first half of 1991, when it stood at $18.25, according to OPEC's news agency OPECNA.

Oil prices have remained high this year even though the Organisation of Petroleum Exporting Countries (OPEC) produced nearly one million barrels per day (bpd) above its nominal output ceiling.

Iraq's imminent return to the oil market for the first time in six years, under a UN-agreed oil-for-food deal, has also failed to dent the high prices.

GCC states-- Saudi Arabia, Kuwait, Qatar, Bahrain, Oman and the United Arab Emirates (UAE)-- produce around 13.4 million bpd, nearly one fifth of the world's total crude supplies. Around 11.5 million bpd of their output is exported, mostly to Japan and other industrial nations.

Bankers said the surge in oil prices would help GCC states in tackling their budget deficits, which started to appear after oil prices began to fall in the mid 1980s. They noted the six countries usually assume an oil price of $14-16 a barrel when calculating their annual budgets.

"With oil prices exceeding $18 in the first half, this means they are two to $3 above the level projected in the GCC budgets. This could wipe out the shortfall during that period unless, of course, Gulf governments were tempted by the price rise to spend more," one banker said.

Saudi Arabia, Oman and the UAE, which have issued their 1996 budgets, have forecast a deficit while the other three members are expected to suffer from a shortfall in their budgets for the fiscal year 1996-1997.

Oil provides more than 80 percent of the income of GCC countries, and at current levels their oil reserves could last 95 years.