Infrastructure and projects of Middle Eastern oil companies will slow down if oil prices dip any further, say experts
The oil exporting states will probably ride out current weak oil prices comfortably, but if oil drops below the price at which they can balance their budgets, it could serve a blow to their existence, said chief financial officer of Arabtec, Ziad Makhzoumi.
Across the Middle East, company heads are wrestling with the implications of the plunge in oil prices over the last several weeks.
After averaging nearly US$120 a barrel in the first quarter of this year, Brent crude oil has slipped as low as US$95 a barrel this month - the lowest level since January 2011 - because of loose supplies and signs the global economy is slowing. A further slide is possible said the Organisation of the Petroleum Exporting Countries (Opec) recently.
“Fortunately, governments these days are more prudent and forecast better now than they did many decades ago. They also make careful calculations to maximise use of limited funds,” said Makhzoumi.
“Cheaper oil may boost growth in some of the weakest states while cooling it in the booming Gulf energy exporters. There could be political as well as economic implications to the price fluctuation,” added Makhzoumi.
However, senior economist for the Mena at HSBC in Dubai, Liz Martins, said, “The oil price drop could be good for the region, by bringing the cost of oil down to a level, which is more sustainable for everyone in the long term.”
