Muscat: Optimism about the Sultanate’s economy grew as Oman crude averaged above $55 in February for the first time in nearly two years.
Futures contract for April delivery traded at an average of $55.07 in February at the Dubai Mercantile Exchange and with reports of high compliance rate of production cuts by OPEC members, oil and gas sector, the major driver of the Sultanate’s economy, is expected to flourish again.
“We don’t expect the oil prices to go as low as 2016 again anytime soon. The worst certainly looks over for the Omani economy,” Mohammed Khalid, General Manager of Descon Engineering, said. “The next few months are going to be crucial. If oil prices stay at this level or touch $60, we can see confidence coming back into oil markets. New projects and job opportunities may arise again if that happens,” he said.
Prior to the output cuts in Vienna late last year, oil was expected to dive to as low as $20 a barrel and threatened the livelihood of thousands of people who worked in related industries. However, the unprecedented deal that OPEC reached with independent producers changed the oil sector’s outlook dramatically.
Apart from the looming shale boom, downside risks for hydrocarbon sector seem insignificant with the demand increasing and market balancing rapidly.
“I think prices stabilising at high levels will drive the economy in terms of investment and job opportunities. If the price of oil remainssimilar by the end of this month, it will be a good year for the oil market and if prices remain stable without any surprises by the second half of the year, we will see investment in the sector again,” LoaiBateinah, CEO of Ubhar Capital, said.
Although oil and gas industry is not expected to contribute a major chunk of government revenues in decades to come as Oman pushes for alternative sources of income before exhausting the reserves, higher oil price will provide the necessary funds to carry out sustained diversification activities.
“I think the most important point regarding high oil prices is that the government will have more funds to carry out diversification, which is going to drive everything in the future. By 2030, oil prices will not matter a lot to the government. It is what they can build using oil revenue that is going to matter in the next few decades. Considering that the oil prices are at this level now, I believe diversification is going to be easier,” a financial analyst said.