Muscat: Oman’s budget is based on the assumption that oil will be at $45 a barrel (OMR 17.5) in 2021. This is a marginal rise of two per cent over last year’s level.
The price of Oman oil in 2021 is also a full $20 lower (OMR8) as compared to 2019, when it cost $65 (about OMR25) a barrel.
However, assessments by a number of financial institutions show oil prices are expected to climb slightly in 2021, compared to their decline in 2020, in large part due to the COVID-19 pandemic.
“Oil prices have experienced a decline in 2020 due to lower oil demand as a result of lockdowns and health measures being taken worldwide to control the spread of COVID-19 pandemic,” said the 2021 budget report published by the Ministry of Finance. “The world’s economic activity is anticipated to recover gradually in 2021, leading to improved global oil demand and better oil prices.”
The International Monetary Fund’s (IMF) October 2020 forecast expects oil prices to touch $46.7 in 2021, compared to the average price of $41.7 (OMR 16) in 2020.
Fitch (September 2020), however, expects oil prices to stay at $45 (OMR 17.5), an increase from $4 (OMR 1.5) since last year. The World Bank (October 2020) has forecast oil prices to hover around $44 (OMR 17), after dipping to $41 (OMR 15.7) in 2020.
Similarly, the Energy Information Administration, which conducted its forecast only in December 2020, expects oil prices to rise to $48.53 (OMR 19), as opposed to rates of $41.43 (OMR 15.9) this year.
All three forecasts expect oil prices to rise significantly in 2021.
The most optimistic of them is Energy Aspects (October 2020), which predicts the sale price per barrel to jump to $58 (OMR 22.5), compared to $44 (OMR 17) in 2020.
The Reuters Oil Poll (October 2020) is more conservative, estimating oil prices to reach nearly $50 (OMR 20), when compared to its 2020 forecast price of $42.45 (OMR 16.3). Projections from Futures Markets, conducted in November 2020, are also in the same vein, with prices expected to rise to $49.6 (OMR 19), in contrast to the estimated 2020 rate of $40.1 (OMR 15.5) a barrel.
Sharply reduced demand for oil and gas impacted Oman’s economy significantly. According to the ministry’s budget guide, oil revenues declined by OMR 1.1 billion last year, when compared to estimated earnings, because its price dropped from the assumed price by a full $10 (OMR 4) per barrel.
“Gas revenue dropped by OMR 500 million as a result of a decline in natural gas price as well as lower sales,” added the guide. “Non-oil revenue declined by OMR 600 million due to the impacts of the COVID-19 pandemic.
“To mitigate the effects on economic activity, the government waived several fees and taxes (such as tourism tax, municipality fees and tax, industrial areas rents, commercial register renewal fee, shipping and handling fees and others), which helped fuel the decline in non-oil revenue,” it said.