Kuwait surplus ‘to reach $28 billion’

KUWAIT CITY: An oil price of between $94 and $100 per barrel in the financial year 2013/14 could generate a budget surplus for Kuwait of between eight billion Kuwaiti dinars ($28bn) and 11bn dinars this fiscal year, a report said.

Although the closing accounts for financial year 2012/13 have not yet been released, the budget is expected to have recorded a massive surplus as oil prices averaged a record $107 per barrel for the fiscal year, added the latest economic update from the National Bank of Kuwait (NBK).

If spending comes in at 10-20 per cent below the government’s forecast, then last year’s budget surplus could end up between 12.8bn dinars and 15bn dinars before allocations to the Reserve Fund for Future Generations (RFFG), said NBK in the report.

The projections for the current fiscal year 2013/14 are linked to three scenarios, which yield oil prices within the narrow range of $94 to $100 per barrel.

Preliminary budgeted spending for this fiscal year is set at 21.2bn dinars. Assuming that spending comes in at an improved 5-10pc below budgeted expenditures, the report projects a surplus of between 8.1bn dinars and 11.2bn dinars before allocations to the RFFG.

This would equate to 17-23pc of forecast 2013 GDP, and would represent Kuwait’s 15th successive budget surplus.

Crude oil prices climbed higher in early July, after trading broadly flat through May and June. The price of Kuwait Export Crude rose from a trough of $97 per barrel in late June to $103 by July 12. Similarly, Brent crude prices climbed by some $9 to $109 – its highest level since early April.

The recent rise in prices seems to have been largely driven by seasonal factors.

The summer period typically sees a rebound in global oil demand as the holiday ‘driving season’ in the US boosts petrol consumption and the Middle East region burns more crude to meet the surge in air-conditioning needs.

Forecasts for global oil demand growth in 2013 have been largely unchanged over the past month, despite the weaker outlook for the global economy.

The International Energy Agency still sees demand growing by 0.8 million bpd, or 0.9pc, compared to 1pc last year.

Meanwhile, the Centre for Global Energy Studies expects global demand growth to come in at a slightly more pessimistic 0.7m bpd, or 0.8pc.

OECD demand is expected to fall by 0.5m bpd (1.1pc), while non-OECD is seen rising by 1.3m bpd (2.9pc).

Crude output of the Opec-11 (excluding Iraq) climbed for the second consecutive month, rising by 129,000 bpd to 27.4m bpd in May. Production in Saudi Arabia saw its largest surge in 18-months – up 144,000 bpd to 9.4m bpd.

GDN, July 21, 2013