As prices hover around 2018 lows and struggle to stay above $60 a barrel, market watchers are reminded of the oil price collapse in 2014 that rocked the hydrocarbon-dependent economies of Saudi Arabia, Kuwait, Bahrain, Qatar, Oman, and the United Arab Emirates. Both global benchmark Brent crude and U.S. West Texas Intermediate (WTI) are down more than 20 percent this month, and if monthly losses continue at the current pace, could see their biggest fall in more than ten years.
But according to Capital Economics, prices as low as $40 to $50 a barrel shouldn't put major strains on the larger economies' balance sheets as long as tight fiscal policy is maintained. The fiscal policy reforms of the last few years — subsidy and spending cuts and the introduction of new taxes — will continue but at a more subdued rate than when first implemented, preventing potential currency devaluations and protecting dollar pegs, the consultancy said in a research note published Monday. This means that current accounts in the major Gulf economies — the balance of imports and exports — are likely to stay in surplus.
Global bank MUFG, meanwhile, is convinced that both Brent crude and WTI are "oversold" and "will rebound from their current bearish market mode," it said it a weekly report Monday. Goldman Sachs, similarly, anticipates a rebound for Brent as OPEC members implement production cuts.