“Asset accumulation of this magnitude is unprecedented in the region, reflecting the fact that between 1970 and 2007 oil prices averaged $ 24.5 per barrel,’’ said Caroline Grady, London-based Gulf economist for Deutsche in the note.
Record oil prices will allow Gulf states to save more this year than ever before even as spending increases, filling the coffers of their sovereign wealth funds and providing a cushion should the price of crude fall in the future.
Saudi Arabia, the largest Arab economy, needs an oil price of $ 44 a barrel to avoid a fiscal deficit this year, the highest breakeven level among GCC Organisation of Petroleum Exporting Countries, Deutsche said. The breakeven price for the UAE is $ 40 per barrel, Qatar is $ 35 and Kuwait is $ 14.50.
“Breakeven oil prices have increased in line with rising expenditure levels as the oil boom is increasingly viewed as permanent,’’ said Grady.
The price of crude has increased 68% in the last 12 months, and has averaged $ 114.05 so far this year compared with $ 72.36 in 2007.
“Our rule of thumb is that every $ 1 per barrel increase in the oil price adds another $ 3.5bn annually to the GCC Opec net foreign assets with Saudi accounting for around two thirds,’’ said Grady.
