GCC Countries To Receive Record Oil Revenues Due To High Prices

Gulf Cooperation Council (GCC) countries are set to enjoy record oil revenues of up to $572bn in 2012, on the back of both high global oil prices and increased levels of crude oil production by the GCC to offset a supply shortfall caused by the tightening western sanctions on Iranian oil exports, the Institute of International Finance (IIF) said on 18 April. This figure, estimated with an average oil price assumption of $114/B for the year, would represent a 6.3% increase on the $538bn generated in oil revenues by the group last year.

“GCC oil producers are called upon to produce more oil to fill the shortfall in supply created by the regional political turmoil,” the institute said. “Saudi Arabia’s production has remained close to 10mn b/d since September 2011, despite the recovery in Libyan supply and weaker global demand for oil. It is likely that Saudi Arabia’s oil production will increase further in the second half of this year to accommodate additional cuts in Iran’s oil production.” International sanctions against Iran were ramped up considerably earlier this year, with EU member countries and others pledging to stop buying Iranian oil as of 1 July. Although Iran has said it is willing to resume talks with the P5+1 group of countries over its nuclear program, there is little expectation of a breakthrough to halt the gradual tightening of sanctions (MEES, 16 January).

With this upturn in oil exports, the IIF estimates the GCC’s collective external current account surpluses will rise to another record high of $358bn in 2012 – up from $327bn last year, while contributing to a more subdued GDP growth rate relative to 2011. “We are forecasting some moderation in overall 2012 GDP growth for the GCC at 4.9%, after the exceptional rise of 6.9% last year,” the institute’s Deputy Director for Africa and the Middle East, Garbis Iradian, noted.

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