Charts & Numbers

The report considered a price of $74 per barrel as point of reference and this means a revenue of KD17.9bn, which is 95 of the states overall revenues.

The report further pointed out expenditures are expected to fall below the estimates by 5-10 per cent, the estimate being KD11.3 billion, thus contributing to hike in surplus.

The report reviewed recent developments in the oil market and noted that “after easing back in the second half of January and early February, the price of Kuwait export crude (KEC) recovered in the second half of the month, crashing through the $90 per barrel mark and reaching a record high of $92.8 on February 29.”

“Concerns about the deteriorating outlook for global oil demand have been outweighed by renewed worries about the prospects for supply, including major shut-ins in Nigeria and the North Sea of 0.13 mbd and 0.14 mbd, respectively and a decision by Venezuela to halt oil sales to US oil giant Exxon Mobil a week later,” it said.

“Policy issues have also played a role: OPECs decision to leave production quotas unchanged at its meeting on February 1st appeared to confirm the cartels resolve to defend prices at around current levels,” it added.

“Some observers see the decision as having imparted a bias towards over-tightening in the crude market, thereby making further speculation on prices a one-way bet.” On prospects for 2008 in general, the report said that “Despite the return of bullish price signals, the outlook for the world economy and global oil demand remains gloomy and uncertain, leaving some analysts struggling to decipher underlying market trends.

“Accordingly, NBK notes that the outlook for 2008 contains significant risks on both the demand and supply sides, which could result in substantial price volatility over the course of the year.

“While market fundamentals may appear bearish at present, numerous other factors may come to play and sustain higher prices.

“Looking at fundamentals alone, a conservative scenario would entail economic growth slowing during the year, with growth in global oil demand coming in at a modest 0.4 mbd and non-OPEC supply rising by 0.5 mbd.

“The recent surge in prices demonstrated the fragility of the market balance in the face of potential supply disruptions not necessarily restricted to geopolitical risks,” the report adds.

The report sums up that should conditions fail to improve, whether due to less increase in non-OPEC supply or cuts in supply, or even too strong demand to be met by supply, the oil prices are expected to remain high and close to their current levels throughout 2008.