The price of Kuwait Export Crude rose from a low of $67.9 per barrel (pb) in early February to $75pb at the start of March as traders were reluctant to push prices too far below their recent range, and heightened tension over the outlook of key currencies affected prices, report from the National Bank of Kuwait has revealed.
The report also revealed that recent trends have supported the notion of a fairly robust recovery for global oil demand in 2010.
“One factor has been the protracted spell of cold weather in the northern hemisphere, which has boosted demand for heating fuel. The Centre for Global Energy Studies (CGES) made a third successive monthly revision to its demand outlook, leaving incremental oil demand in 2010 at 1.3million barrels per day (mbpd, or 1.7%), up from 1.2 mbpd a month earlier,” the report stated.
The National Bank of Kuwait’s market analysis went on to say that prices could ease back this year, if stock overhang persists.
“While there appears to be considerable support for oil prices near current levels, the prospect of significant supply growth this year still leaves scope for the market to weaken later on. Even if OPEC leaves its crude output unchanged at current levels, growth in OPEC NGLs and an anticipated 0.3 mbpd increase in non-OPEC supplies would see total oil supplies rise by around 1.3 mbpd in 2010 – more or less the same as the increase in global oil demand forecast by the CGES,” it stated.
According to the bank, Kuwait is facing a large budget surplus for 2009-10. “With the 2009/10 fiscal year drawing to a close, the price of KEC looks set to average around $69 pb, down 13% on a year ago but still almost double the $35 pb assumed by the government in its budget. Another large fiscal surplus looks essentially guaranteed. If, as we expect, public expenditures come in at 5-10% below the budget plans, the surplus should be between KD6.2 and 7.1 billion before allocating 10% of revenues to the Reserve Fund for Future Generations (RFFG),” the bank reported.
