Rising oil prices to fuel overall business sentiment

The Omani crude has been trading above $80 per barrel since January 12, which is important for the people of the Sultanate of Oman as the budget is based on $50 per barrel for the year 2022.

The Oman crude closed at $86.70 on Tuesday for March 2022 delivery.

It may be noted that the country’s 2022 budget is based on $50 per barrel and the Ministry of Finance confirmed that a precautious approach despite the estimates of global agencies that the average price during 2022 is between $53 and $84.

Oil and gas revenues are forecasted to be 68 per cent of overall receipts,

The IMF is projecting a medium-term global economic growth of 3.3 per cent and forecasting the country’s GDP to grow around 2.5 per cent in 2021 and about 3 per cent average growth over the medium term.

The government has ordered a cap on fuel prices at October 2021 rates until the end of 2022. The government would bear the cost difference that may result from any potential increase in oil prices.

Giving priority to the implementation of projects that serve the economic and social objectives related to the productive sectors, especially the sectors of economic diversification, delaying the implementation of non-urgent projects, and giving great importance in return for the operation of projects that are completed during the year.

Speaking to the Observer, Joice Mathew, head of research at United Securities, said, “The current trend in oil prices is very good for the Omani economy as it will help the government to cut the deficit as the economy is still dependent on revenues from the oil and gas sector. It will also help accelerate government spending on various infrastructure and social projects that will help to create job opportunities and subsequently boost consumer confidence and spending.”

On the cautious note, he said, “Worldwide economies are experiencing inflationary trends and runway oil prices, like around $100 per barrel, will slow down the economic growth or recovery in oil-importing economies.”

Mathew felt that since Omicron has proved to be less fatal than previous variants, there is a possibility of a travel sector growth sooner than expected, which will aid demand for aviation fuel.

Already, there was a jump of over 40 per cent in hotel occupancies in 2021, compared to the previous year.

One of the most important pillars of the Sultanate of Oman’s budget 2022 has been maintaining safe and sustainable levels of public spending while raising non-oil revenue contributions and prioritising the implementation of projects related to the productive sectors and others.

Overall, experts expect GCC economies are expected to grow at a faster pace in 2022 due to rising energy prices.

At the same time, uncertainty prevails over the Omicron variant as it forced governments to reimpose travel restrictions and partial lockdowns in some countries.

@vinot_nair