LOC16:53
13:53 GMT
KUWAIT, April 29 (KUNA) -- Kuwait's budget of the FY 2013/2014 is expected
to produce a large surplus as high as KD 12 billion, despite a drop in global
oil prices against the backdrop of a weaker economic outlook and stronger
non-OPEC oil supplies, the National Bank of Kuwait (NBK) forecasted in a
report released Monday.
The report argued that an oil price of between USD101 and USD105 pb in
FY13/14 could generate a budget surplus for Kuwait of between KD 8 and 12 bn
this fiscal year, following a surplus of KD 15 bn in FY12/13.
"According to press reports, budgeted spending for this fiscal year is set
at KD 21 billion, although the number could subsequently be revised.
"Assuming that spending comes in at a more typical 5-10 percent below
budget, we project a surplus of between KD 8.4 billion and KD 11.7 billion
before allocations to the Reserve Fund for Future Generations (RFFG). This
would equate to 17 percent-24 percent of forecast 2013 GDP, and would
represent Kuwait's 15th successive budget surplus. "
The NBK pointed out that crude oil prices dropped in early April, as
concerns over global economic growth increased and forecasts for global oil
demand were revised down.
"After trading broadly flat through March, crude oil prices dropped sharply
in early April. The price of Kuwait Export Crude (KEC) fell from a peak of
USD107 per barrel (pb) on April 2 to just under USD 100 ten days later.
"This was its first spell below the USD100 mark since July 2012. Other
global benchmark blends also scored notable declines. Brent crude fell USD8 to
USD102, and stood some USD17 below its February peak. The fall in West Texas
Intermediate (WTI) was less steep - by USD6 to USD91 - and this blend remained
slightly above its levels of early March.
The report claimed that the fall in prices seems to have been mostly
generated by demand side factors.
"Firstly, oil demand is believed to have softened for seasonal reasons: the
(northern hemisphere) spring period is typically the maintenance season for
refineries, which reduces the demand for crude feedstock.
"Historically, Q2 quarter-on-quarter oil demand has fallen by around 1.6
million barrels per day (mbpd) relative to its trend. These regular demand
patterns - although predictable - seldom seem to be 'priced in' well in
advance.
"More fundamentally, there have been downward revisions to oil demand
forecasts by key international bodies such as OPEC and the International
Energy Agency (IEA)."
The report identified a number of others factors that led the decline of
the oil prices.
"These revisions were partly driven by soft economic news, including US
jobs data, fresh anxiety over the European debt crisis and an economic
slowdown in China. But they also reflect growing concerns over the long-run
outlook for crude.
"Tougher environmental regulations, the end of the Chinese investment boom,
structural weakness in developed markets and price-induced substitution
effects in favor of alternative energy sources have seen 'peak oil demand'
theories gain traction."
The NBK expected modest growth in the global oil demand in 2013 based on
IEA projections.
"The IEA now puts growth at under 0.8 million barrels per day (mbpd), or 0.
9 percent, slightly lower than in March though down from 1.1 percent at the
start of the year. A key recent driver has been weakness in Europe, where they
expect oil consumption to be at its lowest since the 1980s," reads the report.
It added that the Center for Global Energy Studies expects global demand
growth of 0.9 mbpd, some 0.2 mbpd lower than last month, while OPEC expects
growth to be lower still, at 0.8 mbpd.
"These more downbeat projections have been supported by provisional data
for the first quarter of 2013, which shows demand in OECD countries
disappointing. China is expected to account for around half of total demand
growth this year, though it too has seen a soft start to the year," the NBK
said.
With the regard to oil supply outlook, the NBK report pointed out that the
crude output of the OPEC-11 (i.e. excluding Iraq) inched up marginally by some
17,000 bpd to 27.3 mbpd in February, after dropping to a 15-month low in the
previous month.
"The only significant production increase came from Saudi Arabia, where
output edged up by 41,000 bpd to just over 9.1 mbpd (official figures point to
larger gains of around 100 kbpd). Libyan output also saw a slight recovery in
February, but is expected to slip again next month following the resurgence of
protests at oil installations.
"Meanwhile, production in Nigeria - disrupted in recent months by oil
spills, flooding and theft - slipped by a further 19,000 bpd. Iranian output
remained unchanged from the previous month, despite the implementation of
additional sanctions in February.
The report added that the total OPEC production (including Iraq) edged up
to 30.3 mbpd, bringing a halt to five consecutive months of decline.
"Iraqi production witnessed the largest gain in OPEC, rising by some 58,000
bpd to 3.1 mbpd in February. The increase followed the completion of
maintenance work at the Rumaila field, in addition to expansion of oil storage
at the country's main export depot."
Meanwhile, the non-OPEC supplies are projected to increase by as much as 1.
7 mbpd in 2013, of which less than one fifth will come from OPEC NGLs.
"North American production is likely to lead non-OPEC supply growth, though
there may also be contributions from the partial restoration of last year's
lost output in other locations. In total, global supplies are expected to rise
more modestly in 2013, following a rise in excess of 2 mbpd last year, as cuts
in OPEC output partially offset stronger non-OPEC supplies."
The report concluded that OPEC will have to restrict supplies to prevent
further price weakness. (end)
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