Abu Dhabi: Crude prices will probably stay low for longer than expected, International Monetary Fund (IMF) Managing Director Christine Lagarde said, urging Gulf Arab oil-producing countries to cut spending and boost revenue through new taxes.
A value-added tax that’s the same across the six-nation Gulf Cooperation Council (GCC) should be adopted, Lagarde said in a speech in Abu Dhabi. The measure along with corporate income and property taxes would help raise government income, she said.
"Not only have oil prices fallen by around two-thirds from their most recent peak, but supply- and demand-side factors suggest that they are likely to stay low for an extended period," Lagarde said. That makes it necessary for oil producers to lower reliance on crude for government income, she said.
Global oil prices have dropped 44 per cent in the past year, forcing Saudi Arabia to cut spending on energy subsidies and consider selling sovereign bonds and shares in national oil company Saudi Arabian Oil Co., known as Saudi Aramco. The United Arab Emirates has also eliminated fuel subsidies.
US benchmark West Texas Intermediate (WTI) crude should trade in a range between $25 and $45 a barrel for the rest of the year, "although a very brief spike down towards $20 is possible," the National Bank of Abu Dhabi said in its Global Investment Outlook 2016 report on Sunday. Prices at the lower end of the range will stimulate demand growth, it said.
WTI rose 1.9 per cent on Monday to $30.20 a barrel by 11:20am in Dubai and Brent, benchmark for more than half of the world’s crude, climbed 1.5 per cent to $33.49 a barrel. — Bloomberg News