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U.S. Minister-Counselor for Economic Affairs…

Higher Crude Breakeven Costs Slow Qatari Diversification

Qatar

The breakeven price for Qatari crude oil has risen to US$47.10 per barrel this year from US$24.20 a barrel ten years ago, a Gulf think-tank has calculated. The Gulf Times reports this represented a 95-percent increase in the breakeven price, which might sound like a lot, but it is below the three-digit breakeven price increases in other producers in the region, including Saudi Arabia and the United Arab Emirates, as well as Kuwait.

The UAE’s breakeven costs rose by as much as 206 percent over the ten-year period since 2008, the think-tank, Camco, said, to US$71.50 a barrel. Yet this is not as bad as the case of Saudi Arabia, because Brent and the OPEC basket are both trading at more than US$71. Saudi Arabia’s breakeven price has risen by 134 percent to US$87.90 a barrel, which is substantially more than what the benchmarks are trading at.

Bahrain and Oman fared better in terms of percentages of breakeven price rises, but not in absolute terms, the think-tank also said. For Bahrain, the breakeven price of crude rose by 42 percent between 2008 and 2018, but it rose to as much as US$113 a barrel. Oman’s breakeven price added 25 percent to US$77.10 a barrel and Kuwait was the top performer—or the luckiest Gulf producer—with breakeven prices rising by 46 percent to US$48.10 a barrel. On average, the breakeven price for Gulf oil jumped by as much as 120 percent.

Gulf economies suffered as expected from the oil market downturn, and just as unsurprisingly have benefited from the oil price rise. Yet, high breakeven prices for oil—which is the most important export of the region, after all, and as such a gauge of how their economies are doing—remain a problem. That’s despite a lot of talk about diversification away from crude and into other export products. In fact, the higher breakeven prices likely played their role in slowing down the implementation of diversification measures.

By Irina Slav for Oilprice.com

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